On April 25 2016 the Supreme Court upheld a bank's liability for damages caused to its client by an external asset manager. While this ruling (4A_369/2015) has confirmed settled case law in considering that a bank is in principle not liable for the wrongdoing of an external asset manager, it also clarifies under which conditions a bank may have a duty of disclosure regarding its clients.


The bank had acted as depositary bank for two foreign collective investment schemes launched by the external asset manager. However, the first scheme had to be liquidated as a result of significant losses and the second scheme was liquidated one year later because it failed to attract sufficient funds.

The asset manager launched a third collective investment scheme, but this time the bank refused to act as depositary bank, as it did not understand the investment strategy of the scheme and characterised it as obscure.

When the client contacted the asset manager with a view to invest in the third collective investment scheme, it asked for a letter of reference from the bank regarding the credentials of the asset manager. The bank issued a letter confirming its good relationship with the asset manager, without mentioning the fact that it refused to act as depositary bank and that it did not understand the investment strategy of the scheme. One officer of the bank also took part in a meeting between the client and representatives of the asset manager. On the client's request, he indicated that there was a general risk of complete loss. However, he did not specifically mention the information that the bank possessed on the asset manager's track record.

The client concluded an asset management agreement with the external asset manager and invested significant amounts in the scheme, partly with funds provided by the bank in the framework of a Lombard loan. It finally incurred heavy losses. The external asset manager went bankrupt.

Bank's liability

In principle, the Supreme Court considers that a depositary bank has no general monitoring and disclosure duty regarding its client. Where an external asset manager enjoys broad proxy, the bank has no obligation to draw the client's attention to the risks linked to an investment or to seek the client's approval before executing the external asset manager's orders.

However, in exceptional cases the bank may have such a duty. In such a case, this is where the bank in paying dutiful attention would see that the client did not realise the specific risks linked to an investment that he or she intends to make, or where a special relationship of trust has developed between the bank and the client over the years, so that the client could in good faith expect advice and warning from the bank, even without a request to do so.

In this case, the court referred the case back to the lower-instance court and asked it to examine whether the bank possessed information that should have led it to warn its client of the risks linked to the scheme. Although the Supreme Court did not conclusively answer whether the bank had the duty to warn its client, the wording of the ruling seems to give a positive answer. In addition, the court considered that the bank also had to draw the client's attention to the lack of diversification in the investments made by the external asset manager.

In considering that the general warning given by the bank to the client was insufficient for the client to understand what the concrete risk was, the Supreme Court clarified and broadened the scope of the bank's duties. It appears that banks must ensure a complete transmission to the client of all information that they possess, which is a requirement that may conflict with their other confidentiality duties.

For further information on this topic please contact Christophe Rapin or Christophe Pétermann at Meyerlustenberger Lachenal by telephone (+41 22 737 10 00) or email (christophe.rapin@mll-legal.com or christophe.petermann@mll-legal.com). The Meyerlustenberger Lachenal website can be accessed at www.mll-legal.com.

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