Challenges of the Finance Sector
The professional risks and its legal liability exposure of an asset manager towards its customers (i.e. investors) and other stakeholders have been growing over the past decade.
Investors expect that banks, asset managers or their investment advisors exert due diligence, good faith, loyalty and care.
When investors suffer losses due to a breach of fiduciary duties, compensatory demands are made and lawsuits are filed. Add to this regulatory enquiries and enforcements. If this was not enough, consider the complexity of working cross-border and multi-jurisdiction.
Whatever the client's challenges are, its risk profile determines the design of the solution.
Challenging Environment
The asset management industry is facing a complex environment, which is both, highly regulated and increasingly litigious. Financial institutions are exposed to legal, regulatory and operational risks more than many other industries. If these risks are not well managed, they can have disastrous consequences for their customers or investors, as well as for the directors and officers of the firms concerned.
Certainly, the situation of each participant of this cluster is unique. Yet, its members are highly networked and dependent on each other. Similarly intertwined are their risks and their exposure to liability. Asset managers should consider the exposure arising from international structures or from cross border-activities. Our approach takes theses aspects into account when analysing the risk exposures and designing solutions.
Demanding Investors
Claims for compensation are more frequent in countries like Germany, France, The Netherlands or the U.K. and in other common law-based countries, like the United States. These countries are considering 'strict liability' for financial institutions when it comes to protecting the 'innocent retail investor' or - in the case of the U.S.A. - allow for class actions.
Surely, claims to compensate for losses solely due to market fluctuations would be very difficult to enforce.
However, also in Switzerland, claims can be successfully brought forward if negligence or conflict of interest can be proven.