Art. 17 para. 3 FIDLEV consists of two sentences; the second one is the expensive one: “For discretionary portfolio management mandates and ongoing advisory relationships, the provider shall agree an investment strategy with the client on this basis.” In its Supervisory Communication 03/2026 of 3 June, FINMA measures the financial instruments used against two benchmarks: the client’s risk profile “and the agreed investment strategy.” The second benchmark was drafted by the firm’s own legal team — the suitability assessment inherits whatever the strategy annex has already permitted.

The statute anchors the assessment at the mandate level before the ordinance ever gets there. Art. 12 FIDLEG obliges the portfolio manager to inquire into the client’s financial situation, investment objectives, knowledge and experience, and states in its second sentence that knowledge and experience relate “to the financial service, not to individual transactions.” Art. 17 para. 2 FIDLEV folds “any investment restrictions” into the investment objectives — restrictions the client volunteers. If the client names none, Art. 17 para. 4 FIDLEV lets the financial service provider rely on the client’s own statements, as long as nothing points the other way. The restriction is therefore created in the document both parties sign, not in the review that runs over it later.

FINMA Circular 2025/2, “Rules of Conduct under FIDLEG/FIDLEV,” closes the loop. Under margin no. 14, the financial service provider must inquire into knowledge and experience for every relevant investment category; for portfolio management, that inquiry must take place “having regard to the features of the investment strategy and the types of financial instruments used.” How granular the questions need to be depends on the strategies that may come into play. The strategy is thus the input to the inquiry. A firm that drafts its annex broadly owes the deeper questioning; one that drafts it narrowly may never have to ask at all.

The escalation cases behind the communication sit in the same territory. FINMA cites foreign funds without equivalent supervision, actively managed certificates, and securities from unregulated issuing or structuring vehicles, plus outsized positions in individual illiquid products. On the numbers: in calendar year 2025, supervisory organisations escalated 34 cases by formal notification to FINMA (2024: 23; 2023: 4), with a further 34 escalations triggered by third-party tip-offs (2024: 11; 2023: 5). Half of these came from outside the supervisory chain — from people who never get to see the internal suitability file, but do get to see their own contract.

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On the firm’s own products, the annex carries a second burden. Art. 10 para. 1 FIDLEV requires disclosure of whether the range of products considered in the selection process covers only in-house instruments or third-party ones as well. Para. 2 extends this to instruments issued or offered by companies “closely connected to the financial service provider”; para. 3 defines that connection via majority holding or control. An issuing vehicle controlled by the group makes any certificate issued through it an in-house instrument, triggering the consequences under margin no. 24 of the circular: an objectified selection process, with no remuneration incentives favouring the firm’s own paper. The transitional period for margin nos. 24 and 25 expired on 30 June 2025. A firm that describes its AMC programme in the mandate as a third-party issuance has swapped the ordinance’s definition for marketing’s.

In civil litigation, the annex decides which case the institution has to fight. If the instrument falls outside the agreed strategy, Art. 397 para. 1 and Art. 398 para. 2 OR come into play: the client lays the annex next to the custody statement, and the breach becomes a matter of comparing two documents. Under Art. 97 para. 1 OR, the burden then shifts to the mandatary to prove that “no fault whatsoever” is attributable to it. If the instrument falls within the strategy, the client is left attacking the risk profile instead, and the records for that sit with the institution. Two lines in the annex move the dispute from documentary comparison to the weighing of evidence.

Practitioners read the communication as a controls issue. Bär & Karrer summarises it as a mandate for robust suitability assessments, objective product selection, risk-based due diligence and effective conflict-of-interest controls; Schellenberg Wittmer lists the same points and frames individual risk profiles and investment strategies as tasks for the institution to perform. Both render FINMA’s two-part test correctly and treat the strategy as the output of a process. Art. 17 para. 3, second sentence, FIDLEV treats it as an agreement instead. We covered the figures and product selection on 5 June, concentration risk on 3 July, and ongoing suitability on 8 July. This piece is about the document that sits upstream of all three.

For the next meeting, three checkpoints on the strategy annex of ongoing discretionary mandates. First, define permitted investments by supervisory status rather than asset class: “collective investment schemes under equivalent supervision” is a boundary; “alternative investments up to 25 percent” is not. Second, put issuer and single-position limits into the mandate itself, not just into an internal directive the institution can change at will. Third, draft the language on in-house products along Art. 10 paras. 2 and 3 FIDLEV, not along group marketing language. Every “no” on this list surrenders a benchmark the suitability assessment will no longer have.

What’s settled is the structure: suitability is measured against two benchmarks, and the contract sets one of them. What’s open is whether FINMA will treat an overly broad investment universe as a breach of Art. 17 para. 3 FIDLEV in its own right, or merely as context — the supervisory communication describes outcomes, not clauses. The answer will become visible where FINMA, under item 4.3 of the communication, has already ordered measures at the supervisory organisations and is tracking their implementation: in the audit report for financial year 2026 under Art. 62 para. 1 FINIG, depending on whether the supervisory organisation’s audit programme carries the strategy annex as a discrete audit area.