FINMA Guidance 03/2026: Product Risks in
Individual Portfolio Management

The products in focus included foreign funds, structured products, in particular actively managed certificates ("AMCs"), and securities issued by issuing or structuring companies. FINMA observed recurring risk patterns in connection with in-house products, foreign regulated or registered products lacking equivalent supervision and unsupervised structures. Throughout the Guidance, FINMA groups these products under its repeated reference to "complex, high-risk or illiquid products" (a statutorily undefined category of products). The term appears to capture products whose complexity, limited liquidity, valuation uncertainty, lack of transparency or absence of equivalent supervision may materially increase client risk.

FINMA identified particularly serious irregularities and losses where complex, high-risk or illiquid products were sold to retail clients, or used within permanent portfolio management or investment advice relationships, without sufficient appropriateness and suitability assessments, and without appropriate risk disclosures. The Guidance also shows that FINMA's concerns go beyond the initial investment decision: in some cases, institutions also failed to provide adequate ongoing information on portfolio performance.

FINMA also highlights deficiencies in the handling of conflicts of interest, particularly in connection with in-house products. Escalated issues also included a lack of diversification in contradiction to clients' risk profiles, and the absence of objective product selection processes. Initial and ongoing due diligence, as well as risk management in connection with complex or high-risk products, were, in some cases, inadequate. 

The Guidance initially underlines the existing framework of the Federal Act on Financial Services ("FinSA") and the Ordinance on Financial Services ("FinSO"): in portfolio management mandates and ongoing advisory relationships, financial instruments must be suitable considering the client's risk profile and agreed investment strategy. FINMA then emphasises that particular attention must be paid where high-risk, complex or illiquid financial instruments are used in retail client portfolios. Similarly, FINMA points back to the existing conflict-of-interest rules, requiring transparency on the product universe considered, objective selection criteria, no incentives favouring in-house products and disclosure of unavoidable conflicts.

From an institutional risk management perspective, FINMA clarifies, based on the Federal Act on Financial Institutions ("FinIA") and the Ordinance on Financial Institutions ("FinIO") organisational norms, that a portfolio manager's risk management must encompass all business activities and must also include risks to which assets managed under mandates, and any products managed by the institution, are or may be exposed. Relevant risks include concentration, liquidity, valuation and conflict-of-interest risks. Financial instruments used in client portfolios must therefore be subject to careful, risk-based due diligence. 

This is particularly important for unsupervised products or products lacking equivalent supervision. FINMA mentions several indicators of increased product risk, including the absence of audited financial information, outstanding audit opinions, a change or termination of the audit firm, or a lack of reliable data on the product's structure, valuation or liquidity.

In this context, FINMA also addresses outsourcing of control functions, noting that the responsibility for outsourced activities, including risk management and compliance, remains with the supervised institution. The selection of the provider therefore requires careful due diligence, clear rules on responsibilities and complete access to information. Echoing the shortcomings observed in escalation cases, FINMA further stresses that the scope of any outsourcing should be clearly defined, including whether it covers the risk management of client portfolios and managed products. 

The supervisory figures in the Guidance tell their own story: FINMA has issued the Guidance now against the backdrop of a recent rise in escalation cases.

Ongoing supervision of portfolio managers is carried out by supervisory organisations ("SOs"), while FINMA becomes directly involved where an SO reports serious breaches of supervisory law or other irregularities that cannot be remedied in time. In 2025, however, the number of such reports rose significantly: SOs reported 34 cases to FINMA, and a further 34 cases were triggered by third-party reports, resulting in 68 supervisory cases in total (against 34 cases in 2024). FINMA noted that some of these cases involved serious risk of investor losses, including assets related to retirement provision.

The Guidance is therefore framed by intensified supervisory scrutiny, not only of portfolio managers themselves, but also of the framework around them: FINMA also identified weaknesses at SO level, in particular regarding the authorisation and supervision of audit firms and the processing of audit reports.

The increased use of complex investment solutions, including AMCs and structured products, inevitably brings heightened product governance risks. To prevent further escalation cases, FINMA's Guidance is a timely reminder that these products require robust suitability assessments, objective product selection, risk-based due diligence, effective conflict-of-interest controls and clear oversight of any outsourced control functions. The FINMA guidance clearly reminds financial service providers and financial institutions about their obligations under the existing regulatory framework rather than introducing new rules.