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The Commercial Court strengthens investor rights in the event of conflicts of interest

In its partial ruling HG190111 of May 22, 2023, the Commercial Court of Zurich answered various questions of fundamental importance for investors in an extraordinary and far-reaching decision.

 

The ruling centered on the question of how to deal with the situation where an asset manager has a vested interest in the investments he makes for his client. The Commercial Court came to the conclusion that in the event of such a conflict of interest, there was a presumption that the asset manager had acted in breach of duty.

 

This case law has far-reaching consequences in practice: asset managers - but also investment advisors - often invest their clients' assets in in-house investment funds. For example, the majority of UBS asset management clients hold UBS funds in their custody accounts and Swiss Life Asset Management clients hold Swiss Life funds in their custody accounts. The asset manager or investment advisor has a considerable vested interest in such investments, as he earns double or triple income from such products. According to the case law of the Commercial Court, such investments are presumed to be in breach of duty.

 

As in-house funds are generally significantly more expensive than comparable third-party products, investing in such funds significantly reduces the customer's return. The customer therefore suffers a loss in the form of a lower return. For this reason, it may well be worth having an independent third party review a custody account that contains in-house funds in particular. The SASV will be happy to answer any questions in this context.

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