FINMA Supervisory Notice 03/2026: Product Risks in Individual Portfolio Management
Background
On 3 June 2026, FINMA published Supervisory Notice 03/2026 on risks relating to the use of products in individual portfolio management. The background to the notice is an increase in cases escalated to FINMA due to deficiencies at portfolio managers pursuant to Art. 17 FinIA. FINMA identified recurring risk patterns and shortcomings, particularly in connection with complex, high-risk, illiquid or difficult-to-understand financial instruments.
The supervisory notice is primarily addressed to portfolio managers pursuant to Art. 17 FinIA. However, it is also relevant for managers of collective assets pursuant to Art. 24 FinIA, insofar as they provide individual portfolio management or comparable mandate services.
Key Risk Areas
The focus is particularly on the following products and structures:
- proprietary or related financial instruments;
- collective investment schemes, in particular foreign funds;
- AMCs and structured products;
- illiquid or difficult-to-value investments;
- products issued by issuers or structuring companies that are not regulated or not subject to equivalent regulation;
- products with increased concentration, liquidity, valuation or conflict-of-interest risks.
FINMA points in particular to shortcomings in the suitability assessment, the consideration of clients’ risk capacity and risk appetite, risk disclosure, diversification, and the disclosure and management of conflicts of interest.
Product Due Diligence and Product Selection
A central point of the supervisory notice concerns product due diligence. Institutions must be able to document in a comprehensible manner why a product is suitable for a specific client group or mandate. This includes, in particular, the assessment of the product structure, risks, costs, liquidity, valuation, issuer risk, legal structure and any conflicts of interest.
When proprietary or related products are used, a general disclosure is not sufficient. A specific and comprehensible assessment of the existing economic ties, the market offering considered and the reasons for selecting the product is required.
Practical Relevance
Portfolio managers and managers of collective assets should review whether their processes for product selection, product due diligence, suitability assessment and conflict-of-interest management are sufficiently documented. This applies in particular to proprietary funds, AMCs, structured products, white-label products or other products in which the institution is economically, organisationally or structurally involved.
Action Points
- Review the product universe and the financial instruments used;
- document product due diligence, particularly for complex or illiquid products;
- review suitability processes where high-risk products are used;
- document risk capacity, risk appetite, investment objectives, and knowledge and experience;
- review risk disclosure, in particular with respect to concentration risks, liquidity risks and valuation risks;
- disclose economic ties and conflicts of interest;
- perform sample-based reviews of client dossiers and portfolios;
- supplement the internal control system with product-specific controls.
Additional Relevance for Managers of Collective Assets pursuant to Art. 24 FinIA
For managers of collective assets, the supervisory notice is particularly relevant where they provide individual portfolio management mandates in addition to the management of collective assets, or where they use proprietary or related fund products in mandates.

