When is a retrocession waiver valid? Consent requirements under Swiss case law

Focus and scope#

This note extracts, from Abegglen’s contribution, the validity requirements for an effective client waiver/consent regarding the surrender of retrocessions. It concentrates on the Federal Supreme Court’s 2024 clarifications and the underlying “informed waiver” doctrine. [Abegglen pp. 9–11]

Waiver as an informed consent mechanism#

Abegglen frames the waiver discussion against the conflict-prevention rationale: the Federal Supreme Court’s waiver requirements are presented as flowing from the need to identify and disclose incentive structures that can create conflicts of interest. [Abegglen pp. 2, 9] Accordingly, the contribution recalls that the Court rejected the sufficiency of a blanket waiver “without further details”. [Abegglen p. 9]

Core information elements (as summarised in the source)#

For discretionary wealth management mandates, Abegglen summarises the Federal Supreme Court’s (2011-origin) information elements for a valid waiver as including:

• Magnitude: disclosure of the expected retrocessions’ order of magnitude, expressed as a percentage bandwidth of the managed assets; [Abegglen p. 9]

• “Eckwerte”: information about the “reference values” of the retrocession arrangements (distribution/placement contracts) with third parties; [Abegglen p. 9]

• Conflict warning (case-specific): for inexperienced investors, an additional warning about the potential conflicts of interest associated with such arrangements. [Abegglen p. 9]

The contribution further explains how the “Eckwerte” requirement was commonly implemented in practice: by disclosing percentage bandwidths of retrocessions per investment/product type and providing the calculation basis (investment volume) and the periodicity of payments, either within the waiver clause itself or in an annex referenced by it. [Abegglen p. 9]

2024 clarification: “industry-standard disclosure” is sufficient; per-fund detail is not#

Abegglen reports that claimant counsel challenged “industry-standard disclosure” and argued that the provider must disclose the retrocession information for each individual fund and each individual retrocession agreement. [Abegglen p. 9] In February 2024, the Federal Supreme Court rejected these demands and thereby clarified the meaning of “Eckwerte” while accepting “industry-standard disclosure” as sufficient in the case before it. [Abegglen p. 10] Abegglen emphasises the practical logic the Court accepted: the relevant information must be provided before concluding the wealth management contract, and ex ante “per fund” disclosure would be impracticable because it is not known which funds will be used and would cause an “enormous information flood”. [Abegglen p. 10]

Relationship-sensitive disclosure: wealth management vs advice / execution-only#

Abegglen also highlights that in May 2024 the Federal Supreme Court distinguished execution-only and investment advice relationships from wealth management for purposes of retrocession information, endorsing the view that wealth management principles cannot simply be applied “without further reflection” to advisory/execution-only settings. [Abegglen p. 10] In this context, Abegglen notes that the Federal Supreme Court does not clarify which “base value” should be used for advisory/execution-only disclosure (since there is no managed asset base), while the Zurich Commercial Court is cited as considering values such as the value of the investments or issuance/redemption prices as possible bases. [Abegglen p. 10]

AGB waivers: not objectively “unusual”#

Abegglen reports that the Bern Commercial Court (September 2023) reasoned in detail that a retrocession waiver is not objectively unusual and can therefore be agreed via global adoption of AGB clauses; the Federal Supreme Court followed this view in February 2024. [Abegglen p. 10] The doctrinal anchor referenced in the source is that, as noted in case law, a waiver does not contradict the foreign-benefit character of the mandate. [Abegglen p. 10]

Emerging “question obligation” / inquiry expectation#

Abegglen underlines an additional practical element: in February 2024 the Federal Supreme Court acknowledged that clients can obtain the exact amount by asking and that they are entitled to request more detailed information “at any time”. [Abegglen p. 11] He reads this as the Court recognising an (at least partial) inquiry expectation, particularly relevant for sophisticated clients who knowingly waive without wanting to know the quantum and later claim invalidity by invoking that lack of knowledge. [Abegglen p. 11]

Drafting checklist (source-derived)#

Based on Abegglen’s summary of the jurisprudence, a waiver clause and its surrounding disclosure package should, at a minimum:

• state retrocession bandwidths in percent terms using an appropriate base (managed assets in wealth management; base value for advice/execution-only remains unresolved in the source); [Abegglen pp. 9–10]

• explain the calculation basis and periodicity (e.g., annualised bandwidths based on investment volume); [Abegglen pp. 9–10]

• inform about “Eckwerte” in the sense clarified/accepted by the Federal Supreme Court, operationalised through categorised bandwidth disclosure rather than per-fund disclosures; [Abegglen pp. 9–10]

• ensure the AGB mechanism is drafted so that the waiver is not “surprising/unusual” in the sense discussed, and document client access to further detail upon request. [Abegglen pp. 10–11]

References#

• Abegglen p. 9

• Abegglen p. 10

• Abegglen p. 11

Regulatory notice#

This publication is provided for information purposes only and does not constitute legal, tax or investment advice. It is not an offer, solicitation or recommendation. It is directed solely at qualified investors in Switzerland and is not intended for U.S. persons.