Many foreign investors having accounts in Switzerland cannot estimate if the Swiss bank has done its home work properly according to the rules in place. More and more the MIFID rules enacted in the European Union are taken into consideration also in Switzerland. That means that the foreign investor becomes more and more protected.

Investors have lost money but they cannot exactly say why; the reason is that bankable assets are structured in a complex way. Sophisticated investment products sold by the banker to the investor are frequently not transparent enough to be understood. Complex mathematic formula must be checked in order to find out if the bank acted in a faire way. The huge pressure on the relationship manager to generate profit for the bank is the reason why there are many structured products placed in the client's portfolio. If there are a lot of transactions between the offshore companies, the private accounts and third parties, then it's time for a Health Check!

We check if each single transaction can be justified based on instructions given by the client, or, if certain investments are just made in order to generate profit for the bank. If the structure is complicated and not sufficiently transparent, if many payments have been executed, if many investments and disinvestments have been made, then the situation becomes complicated and completely non transparent for the client. In this situation we are pleased to enter in action in the interest of our clients. We do a Health Check for your Swiss bank accounts.

We are committed to bank reconciliation, and we will reconcile the results. We check each debit and credit advice with the instruction given by the client to the bank. We  compare and match figures from the credit and debit advices with the account statements. We will make sure that each transaction appearing in the accounting records are found in the bank statements, and vice versa. We check the bank documentation if everything is updated and put in place according to the industry standard.

A 75 years old client from Jordan suffered substantial losses due to risky investments concentrated in an exotic and illiquid fund product strongly recommended by his Swiss banker. We asked him if he had a discretionary asset management agreement in place with the bank. His answer was no. He said that no discretionary mandate and no advisory agreement were signed by him. His banker never proposed him to sign even an advisory agreement. Each transaction was subject to his specific approval. Normally, in a situation like this, the client has to take responsibility for the consequences arising out of the investments ordered by him. We asked the bank to send us all documentation. Fifteen files arrived. When we checked the documentation we learned that the bank account relationship started more than ten years ago with very conservative investments. Four years after the beginning of the account relationship, the client received an Arabic speaking relationship manager.

His new banker recommended to disinvest his conservative fiduciary investments and to reinvest in some more profitable funds. At the beginning this strategy was very successful. Each day the banker contacted his client in order to convince him to invest more and more funds in this fund. The client invested more and more. Both parties were happy. It was an intensive relationship between the client and his banker. The bank made huge commissions and the client made money. In 2008 the situation changed. The fund lost substantial value. From his initial investment of USD 15 millions the client had afterwards less than USD 5 millions. He suffered a damage in the amount of more than USD 10 millions.

According to a decision of the Swiss Federal Supreme Court the contractual basis of a bank account relationship exceeding two years has to be considered as an advisory agreement under the condition that the relationship between the bank and the client is very intensive. Even if there is no advisory agreement in writing, an oral advisory agreement has to be assumed if we have a long relationship with the bank and an intensive communication between the client and the bank.

We contacted the bank and we discussed the situation. A professional advice takes care about sufficient diversification - which was not the case here, because 85% of the assets were invested in the same fund. A lack on diversification constitutes a serious breach of the most basic principles in the classic Swiss asset management industry. The high concentration of risks was admitted by the bank and the bank compensated our client. After some hard negotiations on the effective value on the damage suffered by our client we find a settlement with the bank.

In case like this it is not sufficient to speak with the client about his account and his damage. What we need is the edition of all account documentation. Based on all documents we make a so-called Health Check on the account relationship. Due to our experience we are in a position to detect very quickly if the bank made mistakes.

In this case no advisory agreement in writing was in place. The long duration and the intensive nature of the bank account relationship with many investments qualified the contractual relationship with the bank as an oral and effective advisory agreement with all legal consequences in favour of the client. Without file inspection and accurate study of the account history it would have been impossible to obtain a compensation from the bank for the damages suffered by our client.

We fight for the rights of our clients!

An Italian client is living in Thailand since eight years. He called us from Thailand and asked for our participation in the meeting with his bank. He said that he wants us to be on his side when he is asking clarifications from the bank. He was not sure if the bank did everything in the right way. He simply wanted to verify if the bank did their job correctly and in a fair way and therefore he wanted to have a professional on his side in the meeting with the bank. We fixed the meeting with the bank and we checked all transactions. Everything was fine and executed according to the instructions of the client. After the check on all credit and debit advises we checked also the form on the profile of the client. In this form we realised that the client was declared as having still domicile in Italy despite the fact that the client has been living in Thailand since eight years. Based on the Italian domicile the bank enacted the EU-Directive on Taxation of Savings by collecting a withholding tax on the interests received. The client stated that he informed the bank eight years ago that he is living in Thailand but the bank did not revised the client profile form. Therefore, the bank was forced to compensate our client by paying back all the unjustified taxation on the interest payments on his savings for the last eight years. We claimed back  EUR 15'000 to EUR 30'000 for each of the last eightyears!

We went to the bank for a simple clarification and we detected that our client was taxed as an Italian resident because the bank failed to update the client profile form registering him as a resident in Thailand. The EU Directive on Taxation of Savings is applicable to residents in the European Union only and not to residents in Thailand.

Our client was so happy to have engaged us that he invited us in Thailand for a week.

In case you don't feel comfortable with your bank account in Switzerland, feel free to contact us. We are confident to find something in most of the cases we are looking in for a Health Check.

We have had many clients being victims of a conflict of interest. Often, a relationship manager convinced the client to invest in exotic and risky products just because he earned a kick-back from the fund manager. If there is a lack on diversification we will hold the bank responsible for the damage. We will check if the selling orders are executed as fast as possible. If not, we will ask the bank for compensation.

In case you don’t feel comfortable with your bank account in Switzerland, feel free to contact us. We are experienced in this field. It is our daily business. It is notorious that Swiss banks want to avoid appearing in newspapers. In most cases we can reach a satisfactory settlement with the Swiss bank at the end, and we can avoid a bank litigation lasting years.

The current Swiss banking legislation has become very investor friendly. Due to the MIFID rules enacted in the EU, Switzerland becomes more and more under pressure to apply investor friendly rules, and the chance to detect mistakes made by the banking officers who can be converted into compensation payments has become high.

International
Legal & Tax Services

Talstrasse 20
Am Paradeplatz
8001 Zurich
Switzerland

P: +41 44 212 44 04
F: +41 44 212 44 05
enzo.caputo(at)swiss-banking-law.com

enzo.caputo
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Zurich
Baar / Zug
Milan

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