Legal Information on Protection of Investors /
Capital Investment Protection / Investment Fraud in Switzerland

Liability

Relevant errors

Adviser errors may, but need not necessarily cause the asset manager or investment adviser to be liable. Errors may occur in all areas of adviser activity – information, explanation, elaboration of investment strategy, implementation, monitoring – and must occasion loss in order to be relevant.

Note:

There is no guarantee of success! And: High returns = high risk.
Anyone who, following correct explanation, consciously decides on a risky strategy should not be surprised if he incurs a sudden loss.

Principle of liability

If a customer suffers a loss due to incorrect advice or investment of his assets, the question arises as to the liability of the adviser or manager. A further principle of liability comes into play, depending on whether the service was gratuitous or against payment:

  • Provision of advice and information against payment:
    • Compensation for loss in accordance with contract law. The advice of a bank with which the customer holds a deposit is also against payment. The bank earns indirectly on stock exchange transactions that the customer makes on the basis of the advice.
  • Advice and information provided gratuitously:
    • Culpa in contrahendo (obligations in negotiation)
    • Non-contractual liability
    • Implied contract of information
    • Fidelity liability (BGE 120 II 331; 121 III 350)
  • Transfer default:
    • If an adviser accepts a mandate but does not have the necessary specialist knowledge, he may not plead that he fulfilled the order to the best of his ability.

Prerequisites of liability

  • Violation of duty:
    • This mostly consists of non-observance of normal due diligence. The adviser must act with the due diligence of an ordinary businessman.
  • Default:
    • Results from violation of duty.
  • No limitation of liability:
    • Exemption from liability for slight negligence is acceptable in principle. However, whether this also applies to contract law is disputed (cf. BGE 124 III 155, 165).
  • Loss:
    • Compensation for losses suffered due to the investment (including ancillary costs) and loss of profit from lost business; if necessary the customer must allow for the benefits/profits achieved in the context of the same advice.
  • Causality:
    • Problem of legitimate alternative performance, i.e. the loss would still have been incurred even if the explanation and advice had been correct.