Swiss regulation FIDLEG (Financial Services Act) is a comprehensive legal framework aimed at (but not limited to) investor protection mainly at the point of sale similar to EU’s MIFID/MIFID II directives but also includes parts of EU’s PRIIPs and prospectus directive regulation. Upon entry into force on January 1, 2020 (many of the obligations will have phasing-in timelines between 6 months and 2 years) FIDLEG provides for a stringent set of rules for financial service providers providing financial services in Switzerland or to clients in Switzerland. When providing investment advice under FIDLEG Goldman Sachs Bank AG generally provides advice that takes the client`s portfolio into consideration.
Risks Involved in Trading Financial Instruments
Risks Involved in Trading Financial Instruments – GER
Concentration risk arises, or is elevated, in the context of a temporary or lasting reduction in portfolio diversification. Reduced diversification carries the risk, in particular, of significant losses being incurred on the back of the negative performance of a small number of financial instruments with increased relative weighting. This applies where a significant proportion of the portfolio is, e.g., invested in a single financial instrument or financial instruments of a single issuer, with exposure to a specific geographical region, economic sector or currency.
Concentrated exposures increase your portfolio's vulnerability to adverse events affecting specific markets, market segments, geographies, instruments or issuers and may result in an amplified volatility of your portfolio, temporary or lasting material losses, as well as potentially prolonged recovery periods.
Where Goldman Sachs Bank AG provides portfolio-based investment advisory services or discretionary investment management services, it seeks to ensure appropriate diversification of your portfolio in line with your risk profile and, in particular, to avoid unusual concentration risks. However, temporary concentrations in certain issuers, financial instruments or investment categories may still arise.
According to the practice of the Swiss Financial Market Supervisory Authority FINMA, in particular as set out in FINMA Circular 2025/2 on Conduct Duties under FinSA/FinSO, materially exceeding the following thresholds by reference to the total portfolio of the client (including cash and cash-like positions) may indicate an unusual concentration risk:
These thresholds are not relevant with regard to concentrations arising from investments in collective investment schemes (investment funds) that are themselves subject to regulatory risk diversification requirements at a product level.
Risk concentrations may have different causes, including that they may occur passively as a result of price fluctuations; measures to reduce concentrations may not always be required depending on the market environment and/or may not take effect immediately. As such, unusual concentrations may not be fully avoidable. No specific client notifications will be issued in respect of temporary deviations.
Please note that this risk management approach is subject to any individual requirements and/or limitations separately agreed with you. Further, it does not apply to investment decisions made independently and instructed by you, for which Goldman Sachs Bank AG cannot assume any responsibility, including without limitation as regards any resulting concentration risks.
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