FINMA has intensified its enforcement of the conduct obligations governing individual financial services under the Financial Services Act (FinSA). The publicly communicated conclusions of two recent enforcement proceedings are good examples of interventions by the regulator under the FinSA conduct regime. Accompanied by FINMA Guidance 03/2026, which highlights recurring risk patterns, these cases signal that the conduct obligations are now firmly on FINMA‘s enforcement radar.
1) FINMA Guidance 03/2026: A Growing Number of Escalation Cases
In its Guidance 03/2026, published on 3 June 2026, FINMA reported a sharp increase in escalated cases of deficiencies identified at portfolio managers licensed under article 17 of the Financial Institutions Act (FinIA). In 2025, supervisory organizations (Aufsichtsorganisationen, AO) escalated 34 cases to FINMA, up from 23 cases in 2024 and 4 cases in 2023. An additional 34 escalations were triggered by third-party reports (compared to 11 in 2024 and 5 in 2023). In total, FINMA opened 68 supervisory cases in 2025. To put this number of supervisory actions in context: As of end 2025, FINMA had granted licenses to 1,664 portfolio managers and trustees, of which 97 had already exited supervision.
The identified deficiencies were often severe and required intensive investigation by FINMA. In the most serious cases, client assets in the two- to three-digit million Swiss franc range were at stake, and losses in some instances affected retirement savings. FINMA identified recurring risk patterns, including the use of complex, high-risk or illiquid products, such as foreign funds without equivalent supervision, actively managed certificates (AMCs), and securities issued by foreign, unregulated issuance or structuring vehicles, in portfolios of private clients, without adequate suitability assessments, risk disclosure or management of conflicts of interest.
2) Legal Framework: Conduct Obligations Under FinSA
The conduct obligations applicable to financial service providers when rendering financial services are set out in the FinSA and the Financial Services Ordinance (FinSO), and – with respect to supervised institutions – further specified by the FINMA Circular 2025/2 on conduct obligations under FinSA/FinSO. In the context of individual portfolio management, two sets of conduct obligations are of particular relevance: Suitability assessment and the management of conflicts of interest.
a) Suitability Assessment
When providing portfolio management services or ongoing advisory relationships, financial service providers must obtain information on the client‘s financial situation (including regular income, assets and current and future financial obligations), investment objectives (including time horizon, purpose, risk appetite and any investment restrictions) and knowledge and experience (article 12 FinSA). On the basis of this information, a risk profile must be established for each client, against which an investment strategy is to be defined (article 17 (3) FinSO). The financial instruments employed must be suitable in light of the client‘s risk profile and the agreed investment strategy.
b) Management of Conflicts of Interest
Financial service providers must, as a matter of principle, avoid conflicts of interest or ensure that any disadvantage to clients resulting from such conflicts is ruled out (article 25 (1) FinSA). Where conflicts of interest cannot be avoided, they must be disclosed to the client (article 26 (1) FinSO). As part of these conflicts of interest rules, portfolio managers must inform their clients whether the product selection covers only in-house or also third-party instruments (article 10 FinSO). Financial service providers must implement a selection process for the financial instruments used; such selection process must be based on industry-standard, objectified criteria (article 24–28 FinSO). The use of in-house products must not be incentivized through specific remuneration arrangements for the persons involved in providing the financial services (article 25 (e) FinSO).
In addition, the risk management of a portfolio manager must cover its entire business activity and be organized so as to identify, assess, manage and monitor all material risks (article 12 (4) of the Financial Institutions Ordinance (FinIO)). This includes the risks to which the assets under management and any products managed by the portfolio manager are or could be exposed, such as concentration, liquidity, valuation and conflict-of-interest risks.
3) FINMA‘s Observations from Recent Enforcement Actions
Based on the escalation cases analyzed in its Guidance 03/2026, FINMA identified several recurring patterns of deficiencies:
– Inadequate suitability assessments: FINMA found that portfolio managers invested in complex, high-risk or illiquid products without sufficiently examining whether the risk-increasing characteristics of these products corresponded to the financial needs and risk appetite of their clients; cases also included excessive investments in such type of products. Moreover, in some cases, clients were insufficiently informed about portfolio developments and performance. FINMA emphasizes that it expects that financial service providers pay particular attention to suitability considerations when using high-risk, complex or illiquid financial instruments in the portfolios of retail clients.
– Deficient management of conflicts of interest: In cases involving in-house products, arrangements to avoid conflicts of interest were found to be inadequate. Specific deficiencies included non-transparent double fee structures, remuneration incentives favoring the use of proprietary products, a lack of diversification in clear contradiction to clients‘ risk profiles and the absence of product selection processes based on objectified and customary criteria.
– Outsourcing of control functions: FINMA observed that smaller institutions frequently outsourced risk management and compliance functions to external, non-licensed service providers. In the escalated cases, this outsourcing often resulted in standardized rather than individualized controls, leading to unclear responsibilities and control gaps. Additionally, product or business risks were often not sufficiently considered.
– Shortcomings in due diligence and risk management: Specifically with respect to risk management, FINMA expects financial service providers to carry out a risk-based due diligence on the relevant products. In this context, FINMA noted that in case of unsupervised products or products without equivalent supervision, warning signs such as the absence of audited financial information, outstanding audit opinions, changes in or termination of the audit firm, or the lack of other reliable information on the structure, valuation or liquidity could be indications of increased risk.
While FINMA‘s Guidance 03/2026 focused on portfolio managers, FINMA noted that it has observed similar patterns among managers of collective assets and other supervised financial institutions.
4) Two FINMA Enforcement Proceedings in Detail
Two recent and published enforcement proceedings illustrate how FINMA applies the FinSA conduct obligations in practice. Both cases involved a systematic prioritization of the portfolio managers‘ own financial interests over those of their clients and severe violations of the obligations regarding suitability assessments and conflicts of interest.
a) Wendelspiess Partners AG
On 3 June 2026, FINMA published a media release announcing the conclusion of enforcement proceedings against Wendelspiess Partners AG (in liquidation) and two individuals. The proceedings had been initiated in early 2025 following a report by the competent AO, which had identified indications that clients of Wendelspiess Partners were invested in a non-Swiss fund that the firm had itself established and managed since 2021 and that was experiencing significant liquidity problems.
The investigation revealed that the fund predominantly invested in an investment company domiciled in the Canton of Zug and in companies affiliated with it, and also extended loans to these entities. Wendelspiess Partners itself and several of its officers held interests in the fund. These personal interconnections gave rise to conflicts of interest about which clients were not or only insufficiently informed, constituting a severe violation of the obligations regarding conflicts of interest under FinSA.
Furthermore, FINMA concluded that the fund was insufficiently diversified, leading to a significant concentration of risk. The over 400 clients of Wendelspiess Partners, whose financial knowledge was mostly assessed as moderate to low and who largely regarded themselves as risk-averse, were not adequately informed about the risks of investing in the fund. The investigation further showed that the suitability assessment, i.e., whether an investment in the fund was appropriate for the respective client, was entirely omitted. Notwithstanding this, virtually all client assets were unilaterally invested in the fund. The fund‘s assets under management amounted to over CHF 83 million at the end of 2024, and it now faces a total loss.
FINMA concluded that the interests of clients were systematically subordinated to the firm‘s own interests. It imposed multi-year industry bans on two responsible individuals and revoked the license of Wendelspiess Partners.
b) Swiss Fund Management AG and BZ Berater Zentrum AG
On 29 June 2026, FINMA announced the conclusion of enforcement proceedings against Swiss Fund Management AG (in liquidation) (SFM) and BZ Berater Zentrum AG (BZ), as well as an individual, for severe violations of the FinSA conduct rules. The proceedings had been initiated in 2024 following a supervisory on-site inspection at SFM, during which FINMA identified indications that the funds managed by SFM and the portfolio management clients of BZ held high proportions of illiquid bonds primarily intended to finance foreign real estate development projects.
The investigation revealed that the bond issuers were all interconnected. Investor funds amounting to approximately CHF 200 million were invested directly or indirectly through the funds in illiquid bonds of doubtful value. The bonds were issued by related, non-operationally active entities that immediately transferred the proceeds, contrary to advertising promises and without collateral, to real estate investment companies controlled by persons involved in the scheme. Parts of the bond proceeds were also used to acquire participations and finance the operations of further entities, including SFM and BZ themselves. Due to the close interconnections, the persons involved could dispose of the bond funds largely without restriction and, in part, arranged personal loans in the double-digit millions.
During the investigation period, BZ managed approximately 2,000 portfolio management mandates. FINMA concluded that SFM and BZ had, among other things, severely violated their obligations to avoid conflicts of interest and resulting disadvantages for clients. Investor assets were invested, driven by the firms‘ own financial interests, in an undiversified manner in proprietary products that did not match the investors‘ risk profiles and contradicted the stated investment purpose, constituting a severe violation of the suitability and appropriateness assessment requirements under FinSA.
FINMA revoked SFM‘s license as a fund management company and appointed the investigating agent as liquidator. BZ‘s application for a license as portfolio manager was denied, requiring BZ to cease its asset management business within 30 days. A multi-year industry ban was imposed on a responsible individual. In addition, FINMA ordered the disgorgement of unlawfully obtained placement commissions in the millions of Swiss francs, accrued since the entry into force of the FinSA conduct rules. Approximately 150 persons have since initiated mediation proceedings against BZ through the competent ombudsman‘s office.
5) Conclusion and Outlook
The two enforcement proceedings and the recently released Guidance 03/2026 confirm that FinSA conduct obligations have arrived in FINMA‘s enforcement practice. Less than three years after most portfolio managers obtained their FinIA licenses, the regulator has demonstrated its willingness to intervene decisively where the conduct rules are disregarded. The severity of the sanctions imposed (license revocations, multi-year industry bans and disgorgement of profits) underscores the consequences of non-compliance.
At the same time, the cases illustrate a broader challenge inherent in the FinSA conduct framework. The obligations regarding suitability assessments and conflicts of interest are formulated in relatively open-ended terms, relying on general principles rather than prescriptive rules. Through its enforcement proceedings, FINMA has begun to fill these principles with concrete substance, providing the market with initial guidance on where the boundaries lie. In particular, the cases make clear that the use of in-house products requires robust conflict-of-interest frameworks, that suitability assessments must not be a mere formality, and that the outsourcing of compliance and risk management functions does not diminish the institution‘s own responsibility. That said, Swiss law neither provides for per se prohibitions of distribution of complex products to retail clients or use of such products in portfolio management mandates nor do the Swiss rules mandate target market assessments or similar measures. Navigating the broad permissiveness of Swiss law as to the type of instruments used on the one hand and the conduct rules and risk management requirements on the other hand is a key challenge faced by portfolio managers.
However, the two published enforcement proceedings concern particularly severe instances of misconduct and are not representative of standard industry practice. While the conduct and risk management standards articulated in these proceedings are undoubtedly important, FINMA should also exercise restraint in extrapolating from such extreme cases when issuing regulatory guidance or circulars of general application. The well-established principle that “hard cases make bad law“ equally applies in the regulatory context: disproportionately prescriptive requirements derived from outlier cases risk imposing undue burdens on the broader industry without a commensurate supervisory benefit.
Given the continued steep increase in escalation cases, from 9 in 2023 to 34 in 2024 and 68 in 2025, further enforcement proceedings can be expected. Portfolio managers, particularly smaller firms that rely on outsourced compliance functions, are well-advised to critically review their processes in light of recent enforcement action and the standards articulated by FINMA.
Patrick Schärli (patrick.schaerli@lenzstaehelin.com)
Laura Wälchli (laura.waelchli@lenzstaehelin.com)