FINMA publishes guidance on risks in the use of products in discretionary portfolio management
On 3 June 2026, the Swiss Financial Market Supervisory Authority FINMA published Guidance 03/2026 on risks associated with the use of products in individual portfolio management following an increased number of escalation cases under article 17 of the Financial Institutions Act ("FinIA"; SR 954.1), with 68 cases opened in 2025 (2024: 34; 2023: 9).
Against this background, FINMA emphasises that the existing regulatory framework already provides a clear framework and stresses that these duties should be taken seriously. The guidance signals a clear supervisory priority for FINMA on (mis-)selling of complex, high-risk or illiquid products to retail clients without regard to client’s risk capacity and risk appetite and without appropriate risk disclosure or diversification.
Portfolio managers and other institutions providing discretionary portfolio management should review
- the use of complex or foreign products, such as foreign funds which are not subject to equivalent supervision, actively managed certificates (AMCs) and other securities issued or sponsored by unsupervised (foreign) entities, in particular, where the products are not sufficiently transparent, are hard to value, do not provide liquidity or lack appropriate supervision;
- the robustness of their suitability processes and documentation aiming to ensure that the products correspond to the risk capacity and investment objectives of their client, as well as, beyond the suitability assessment ensure appropriate diversification and monitoring of the portfolio and its performance;
- their conflict-of-interest frameworks to avoid, manage or disclose risks related to in transparent fee structures (including double-dipping, when permissible) and (remuneration based) incentives to favor proprietary products by implementing an objective product-selection processes based on customary market criteria;
- their governance framework, due diligence and risk management to ensure that products are subject to initial and ongoing due diligence to identify and monitor key risks, such as liquidity, valuation and concentration risk; and
- their governance of outsourcing arrangements to arrange for sufficient oversight, through (i) tailored controls requiring the necessary resources and specialist knowledge and (ii) clear attribution of responsibilities to avoid any control gaps.
