Newsletter: No obligation to surrender retrocessions in execution-only relationship

Federal Supreme Court judgment 4A_149/2025 of 12 January 2026 (intended for official publication): No obligation to surrender retrocessions in excution-only relationship

In a decision published today (13 February 2026), the Federal Supreme Court clarifies the long-standing controversy over obligations to surrender retrocessions in execution-only relationships (see our previous newsletter). Just like the lower courts, the Federal Supreme Court denies such an obligation.

Facts and reasoning of the Federal Supreme Court

A bank customer had held an account with a Geneva-based private bank in an execution-only relationship. Between 2010 and 2017, the bank received commissions totaling CHF 31'477 from the sale of funds and structured products to this customer. The Geneva Courts dismissed the claim for the surrender of the retrocessions (cf. facts of the case lit. A-C).

The Federal Supreme Court recalls the principles governing the obligation to surrender retrocessions in asset management relationships. Under Art. 400(1) of the Swiss Code of Obligations, the asset manager ist obligated to account for the management of the business and to surrender everything that has come into its posession, for any reason whatsoever, as a result of such management. Assets received by the asset manager from third parties are also subject to the obligation to surrender if they are a direct result of the performance of the mandate. The decisive factor is whether there is an intrinsic connection between the execution of the mandate and the financial benefit, which gives rise to a risk of conflicts of interest; mere incidental benefits without such an intrinsic connection (such as tips or customary gifts among businesspeople) don't need to be surrendered. The decisive citeria for assessing the intrinsic connection - and thus the obligation to surrender - is the risk of a conflict of interest.

The Federal Supreme Court applies these principles to the controversial question regarding the obligation to surrender retrocessions in execution-only transactions (consid. 3.5 et seq.). In an execution-only relationship, the bank has no general duty to protect the client’s interests or to provide information. Furthermore, when merely executing client orders, the bank has no influence over which transactions the client carries out. The receipt of retrocessions therefore does not depend on the bank’s conduct, but solely on the client’s decisions. There is no risk of conflicts of interest and, consequently, no intrinsic link between order execution and financial benefit, nor any obligation to surrender such benefits.

According to the Federal Supreme Court, nothing else follows from the regulatory provision regarding the payment of compensation by third parties (Art. 26 FIDLEG). It considered that, although this provision may also apply to execution-only transactions according to the Federal Council Dispatch, Art. 26 FIDLEG also serves to prevent conflicts of interest. Thus, also from a regulatory perspective, the risk of a conflict of interest is the decisive assessment criteria (consid. 3.6.5)

In light of this, the Federal Supreme Court denied the customer's claim for restitution. It did not have to assess the validity of the customer’s waiver (consid. 3.7).

Remarks

The Federal Supreme Court's ruling clarifies a long-standing controversy that has been addressed in varying ways by cantonal courts. This clarification provides legal certainty, which is to be welcomed.

The Federal Supreme Court's reasoning is persuasive on the merits. The assessment of the obligation to return funds must be based primarily on its purpose (the avoidance of conflicts of interest). There is no risk of conflicts of interest in the mere execution of customer orders. There is no intrinsic connection between retrocessions and order execution. Such interpretation should allow for a meaningful and clear distinction between direct and indirect benefits.

The ruling once again underscores the importance to distinguish between execution-only and investment advisory relationships, a distinction that can be difficult to make in individual cases.

Please do not hesitate to contact us if you have any questions on this topic.