Swiss Financial Institution Clients May Have Claims for Hidden Fees (6/12/20)

I picked up this article, reporting that investors may have some relief for Swiss financial institutions receipt of hidden undisclosed fees related to their investment of client funds.  Leon Harris, How to turn the tables on the Swiss banks – opinion (Jerusalem Post 6/11/20), here.  According to the article, bribery and kickbacks are normally illegal, but Swiss financial institutions for many years took so-called “retrocession fees” or “portfolio maintenance commissions” from funds or other investment vehicles that reduced the yield to the financial institutions' customers without disclosure to the customers.  The example is:

Annual return, say: 5%
Undisclosed “Portfolio maintenance commission”: 2%
Disclosed return to the investor: 3%
Disclosed bank fee: 1%
Net disclosed return: 2% (less than half the 5%)
In other words, the bank or financial institution may have received not only a disclosed fee appearing on your bank statement, but also a hidden fee from the fund or similar where they invested your money.

The article reports

This lucrative business model helped the Swiss banks to enjoy billions of dollars of retrocession fees that are due to the investors and can therefore be claimed back. According to a study, around $4 billion  of retrocessions were apparently collected by the banking institutions in 2012 alone.

The article says that, pursuant to Swiss Federal Court decisions, clients of the banks suffering the economic cost of these hidden fees may have a remedy.  The process, as described, is:

Claim process: 

It is thought that many investors using Switzerland were affected by the unlawful retention of retrocessions. However, the federal banks do not return the kick-back commissions to their customers pro-actively, it is up to each customer to make a claim. Unfortunately, the claim process may not be simple. People affected report lack of feedback from their bank even after multiple inquiries. Others were apparently brushed off as the banks referred to waivers that were often not legally valid but enough to scare investors away. In later years, usually after 2013, the small print was tightened up at many institutions, so a detailed review year by year is needed. 

Consider using experienced professionals who specialize in this area to make and pursue your claim. 

The years 2010 to 2013 are particularly interesting, as a number of Swiss institutions apparently received then large amounts of retrocessions, for which there are no or insufficient waivers. Accordingly, any claim should be lodged as soon as possible. The Swiss statute of limitations is ten years unless a claim is made for a refund and to stop the clock

I have no other information on the process.  I urge readers with additional information that might be useful to readers to post comments to this blog entry or to email me at jack@tjtaxlaw.com.