Kick-back

from Wikipedia, the free encyclopedia

Kickback (or kickback ; German  rebate ) is in the economy a Anglizismus for the refund of a part of the amount paid from a store between at least three parties by a party to another. Typically, the kickback is not made known to the person who ultimately has to raise it. Synonyms are hidden commission and - especially in Switzerland - retrocession . According to the case law of the Federal Court of Justice (BGH) in Germany, the withholding of the payment is a regular occurrenceThe legal situation in Austria and Switzerland is similar to a breach of contract that leads to civil damages .

Disambiguation

Sales organizations from financial services (such as banks , brokers , agents , multi-level marketing ) received from product providers (eg. As investment companies ) commissions on products sold. These commissions are paid by the product providers from the fees of the investors. Such commissions are also common in the insurance industry.

In the area of investment and are often trailer fees (in Switzerland Bestandesretrozession called) paid for each existing investment amount. For example, if a customer purchases an investment fund and pays the capital investment company (KAG) annual fees of 1% of the sums invested, the KAG passes 0.4% of this on to the broker (bank, investment advisor, etc.) as portfolio commission.

Kick-backs also exist in the credit card business, in the insurance industry, in the medical industry and in the advertising industry .

Problem of kickbacks

The fundamental problem with hidden commissions is that they cause the agent a conflict of interest . As an agent of the customer, he should only represent his interests vis-à-vis the service provider - for example, the bank advisor vis-à-vis fund companies. If the intermediary receives payments from the service provider, the amount of which is unknown to the customer, there is a risk that he will no longer primarily represent his interests. In economic terms, it is a so-called principal-agent problem . Disadvantages for the client (customer) can best be avoided by disclosing the reimbursements as fully as possible, which is why consumer advocates and courts have demanded this. Politicians have also repeatedly called for the disclosure of hidden commissions.

Kick-backs in the coalition agreement of 2009

The coalition agreement of autumn 2009, contains in Section 4.5. on consumer protection (subsection investor protection) the declaration of intent to introduce a general obligation to disclose reimbursements, quote: “We want to create consistent financial services law so that consumers are better protected against avoidable losses and incorrect financial advice in the future. Adequate investor protection against dubious product providers and incorrect advice is guaranteed in principle regardless of which product or distribution channel is used. Liability for products and sales is to be tightened. (...) Customers must be able to quickly identify the essential components of an investment, all costs and commissions including reimbursements . "

Kick-backs in the financial sector

Legal situation in Germany

As early as 1905, the Reichsgericht (RG) ruled on hidden bank commissions. The BGH first dealt with kickbacks in 1990 in connection with banking transactions and sentenced them to compensation. In addition, the BGH ruled on December 19, 2006 that the respective sales organization is obliged to inform investors about these kick-backs. If this information is not given sufficiently clearly or not at all, the investor is entitled to a claim for damages . If the investor fails to provide information, he can reverse not only the fund purchase but also all other securities transactions. In its judgment of March 16, 2011, the Stuttgart Higher Regional Court - as far as can be seen - for the first time commented on questions of liability of the organs and their criminal involvement in kick-back payments. Most recently, between March and August 2011, the Federal Court of Justice confirmed its investor-friendly kick-back case law in three decisions. It now applies that investors who bought fund units after receiving investment advice from a bank, had to pay an undisclosed sales charge or other commission and later suffered losses, can have these losses reimbursed by the advising bank. As far as is known, before the BGH decision of 2006, all banks received kick-back commissions without informing investors.

Legal situation in Switzerland

In Switzerland, kickbacks are called retrocessions or retros for short . The legal situation there has recently been similar: Unless the customer has expressly agreed to such payments when concluding the contract, a reclaim is possible. The Federal Supreme Court ruled on October 30, 2012 that maintenance commissions generally belong to the customer. At the moment (November 2013) it is not yet completely clear whether kickbacks that have not been approved by the investor can be reclaimed for five or ten years. In addition, current case law focuses on asset management mandates. Whether investment advisors can also request reimbursement is the subject of ongoing research and debate. On February 12, 2013, the Zurich Tax Office published a statement on the tax treatment of the retrocessions reimbursed by the banks.

Legal situation in Austria

In Austria, too, financial service providers are obliged to disclose potential conflicts of interest to investors through kick-back payments. This applies, for example, to asset management contracts. The Supreme Court held that remuneration that the fund company receives from the custodian bank for each switch in the portfolio it manages represents an incentive for it to buy or sell securities as often as possible, even if these switches are not in the are in the best interests of the investor. The Supreme Court therefore qualified the retrocession as a “threat to customer interests”, as it creates an incentive for the advisor to “also take into account the bank's own interest in the greatest possible remuneration”. In a decision, the Supreme Court therefore awarded the investor not only the kick-backs received from the bank or the asset manager, but also compensation for the price loss suffered. However, if the bank or the investment advisor has disclosed the fact and amount of the kickback to the customer in advance, there is usually no reason for claims for damages. Kick-backs in Austria may also be criminally significant. According to § 153a StGB , the "acceptance of gifts by those in power" is punishable by up to one year in prison. It is an act of infidelity .

The ongoing kick-backs that fund managers pay to the custodian bank amount to up to 50% of the fund's own management fee, which in turn often amounts to between 1 and 2.5% of the fund volume of the investment fund. JPMorgan-JF Taiwan Fund , for example, pays an Austrian bank 0.75% per year based on the fund volume, Top Vario Mix continuously 0.8%; Reimbursements of this amount are a sales motive for the bank that should not be underestimated. This is worrying as the kickbacks are paid at the expense of the issuer's management fee, which is intended to reward the manager for optimally managing the fund and is charged to the fund. If fewer funds are available for this because a large part of the management fee goes to the broker as portfolio commission, the fund tends to be less well managed.

In addition, the bank receives a large part or even the entire issue surcharge of typically 5% as sales commission. The bank therefore receives a one-time sales commission and an ongoing so-called portfolio maintenance commission, another ( friendlier ) term for retrocession or kick-back. The Union Investment will concentrate its product information partially open sales commissions and kick-backs of their funds. In the case of the GenoEuroClassic mixed fund, it says “Your bank receives 90% to 100% of the sales charge [3%] depending on its sales status with the fund company” and “Your bank receives a one-off management fee [maximum 1.5%] depending on its sales status at the fund company 25% to 35% ”. At the Union Investment FairWorldFonds, the kick-back is comparatively low at 13.2% of the management fee.

BGH decisions on kickbacks for closed funds

In the area of closed funds (especially media and real estate funds ), many legal questions about kickbacks have long been extremely controversial. The disagreement began with the question of what is to be understood by kick-backs in the case of closed funds (only one-off reimbursements or also recurring so-called internal commissions ), the question of how far the disclosure obligation towards investors should go, to the question of who should meet an obligation to disclose.

While initially an obligation to inform about internal commissions was only affirmed from the limit of immorality , the Federal Court of Justice introduced a threshold value of 15 percent of the investment amount with fundamental rulings on the brokerage of closed (real estate) funds in 2004. Above this value, there should be an obligation to provide information about internal commissions.

In a decision of January 20, 2009, the BGH declared, with reference to a ruling from 2006, that a consulting contract for the brokerage of an investment generally requires an explanation of reimbursements ( kickbacks ), regardless of their amount. This case law surprised the banks in particular, who subsequently argued that this “new” obligation did not apply to “old cases” from before 2009 at least.

In a decision of June 29, 2010, the BGH made it clear that this obligation had already existed since 1990: on the basis of two judgments by the Federal Court of Justice in 1989 and 1990, a corresponding duty of disclosure was recognizable for banks.

After the BGH had clarified in this regard, a dispute arose over the legal question of what exactly should be understood by internal commissions and what exactly is to be understood by reimbursements (kick-backs in the narrower sense). With three BGH decisions from 2011, this question was also unequivocally answered by the highest court. In the first of the three resolutions, the BGH defines internal commissions as “undisclosed sales commissions that are paid for a fund from the fixed assets.” They “must be clarified in a fund (...) under certain circumstances because they affect the value of the dated Investors have acquired the investment and can therefore cause a misconception in this regard ”.

In contrast, reimbursements are always subject to disclosure. In the same ruling, the BGH defines them as "regular sales-dependent commissions which, in contrast to internal commissions, are not paid from the fixed assets but from openly disclosed commissions such as front-end loads and management fees, so that there can be no misconception about the intrinsic value of the investment among investors whose return flow to the advisory bank is not disclosed, but takes place behind the back of the investor, so that the investor cannot recognize the particular interest of the advisory bank in the recommendation of this particular investment ”. The decisive factor for the duty to provide information is that “without this information, the investor cannot recognize the particular interest of the advising bank in recommending this particular investment”.

Even if fund prospectuses were handed over in good time, this should not be understood as “proper clarification” if the investor could not infer from the prospectus whether and in what amount the bank would receive a commission. The statement in a prospectus that "third parties" may be involved as sales partners is not sufficient - especially if the amount of the remuneration the bank receives remains unclear.

Furthermore, in its decision of March 9, 2011, the BGH made it clear that the principles outlined for unsolicited information about kickbacks only apply to banks and not independent consultants . Because bank customers usually had long-term relationships with their bank. They use different services and products for which they also pay for. Therefore, when advising on investments, customers would not assume that the bank receives commissions from third parties. In contrast, according to the BGH, investors assume that freelance consultants finance themselves through commissions. This clarity in the distinction between credit institutions and independent consultants is new.

In a decision from July 2010, the Düsseldorf Higher Regional Court stated that a consulting contract would also oblige a freelance investment advisor - not just a bank - to explain the amount of his remuneration to his customers. The Higher Regional Court of Düsseldorf supported a judgment of the Regional Court (LG) Munich of February 25, 2010. Such an obligation to provide information already follows from general civil law principles, which are in particular immanent in a consulting contract and according to which each contracting party is obliged to uncover conflicts of interest that are contrary to the contract. These principles should apply not only to banks but also to other financial service providers. The decision of the BGH on March 9, 2011 rejected this argument.

In two further decisions on the same case in 2011, the BGH confirmed its decision of March 9, 2011: On July 19, the XI. Civil Senate of the BGH stated that the legal question of what is to be understood by reimbursements requiring disclosure should be clearly answered on the basis of previous Senate case law. Furthermore, the BGH confirms that if there is no information about reimbursements, the presumption of correct behavior that leads to a reversal of the burden of proof applies . The bank must therefore prove that the investor would have acquired the capital investment even if properly informed.

The BGH adds particularly clearly to its statements on the question of the fault of the bank in the event of failure to provide information about reimbursements. The banks regularly stated that they had not known before 2009 that rebates had to be clarified. The BGH countered this by stating that it had already been made clear in the past that at least since 1990 advisory banks could not invoke an unavoidable legal error with regard to their duty to provide information. Also from the distinction between internal commissions and reimbursements - according to the BGH - no lack of fault can be derived from the bank.

In addition, the BGH clearly differentiates its decisions on the calculated profits of the seller in a two-person relationship from the principles of its kick-back decisions. The question of profit margins is about a two-person relationship. In a three-person relationship, as is the case with reimbursement, on the other hand, according to the BGH, the conflict of interest resulting from the grant is not obvious, so that it must be clarified.

In its decision of August 24, 2011, the BGH reiterated that the failure to provide information about remuneration was causal for the investment decision. The bank must explain and prove otherwise. Furthermore, the BGH once again made it clear that its decisions do not represent a far-reaching change in the case law on the duty of advisory banks to provide information on internal or sales commissions, but that it only applies the principles that are already in force.

Finally, with the decision of August 24, 2011, the BGH again differentiates internal commissions from reimbursements. As already shown in the Senate resolution of March 9, 2011, internal commissions are not reported sales commissions that are paid in a fund out of fixed assets. Refunds requiring disclosure are concerned if “the investment prospectuses openly show various commissions, but do not state that and in what amount the defendant, as the advisory bank, receives these commissions in part”. In no way had it been decided in the past that “internal commissions openly disclosed in the investment prospectus, i. H. Sales commissions included in the investment amount (...) expressis verbis no reimbursements requiring disclosure ". The term “openly reported internal commission” is a contradiction in terms.

According to the BGH, the assumption that past judgments by the Federal Court of Justice show that there are no reimbursements requiring disclosure even if the relevant commissions are shown as such in the investment prospectus is unfounded. The BGH explicitly states that the naming of issue surcharges and management fees as the source of the reimbursements is not to be understood as conclusive, but only as an example.

Kick-backs in junk property deals

Occasionally, real estate is advertised in advertisements for which the buyer can finance the purchase price 100 percent with third-party financing ( full financing ) and receives a one-off payment ( kick-back , often also cash-back ) when the purchase is processed . These hardly reputable offers are primarily aimed at buyers who are stuck with liquidity problems and are actually not interested in a property.

In economic terms, the buyer acquires a scrap property - which is usually considerably overpriced . This is fully financed by the bank, which means that the buyer does not have to use equity . The buyer pays part of the purchase price to the agent as a brokerage fee . This in turn pays part of this back to the buyer himself. The business can only work for the participating bank, in particular, if a significantly excessive sales price is realized with this financing. The phrase “scrap real estate” used in this context does not mean that the property being traded has to be in poor condition, but only that the price is well above the market value .

If the bank or, in particular, the buyer is not informed of these payments and thereby misled about the value of the property, it is criminal fraud by the agent.

Kick-backs in the medical industry

In the healthcare industry, kickback is defined as an improper payment in the collaboration between service providers and contract doctors. Example: The attending physician refers his privately insured patient for an examination, often an MRI . He explicitly recommends a specific radiologist who will reimburse part of his fee to the referring physician (doctor). Such an assignment for a fee is prohibited under professional law, as it violates the principle of free choice of doctor and often also the principle of economic efficiency . A similar approach is common at the AugenDiagnostikCenter (ADC) (first founded in 2000 in Munich, today over 100 centers in Germany). Here, ophthalmologists are given modern examination equipment for individual health services (IGeL) in return for referrals for operations free of charge or for a symbolic fee. The more efficient use of expensive diagnostic technology by the ADCs, on the other hand, is considered economically and ethically sensible. Another variety of kick-backs in the medical industry is partial community practice .

Kick-backs as a form of corruption

Not every kickback is a form of corruption, and yet kickbacks are likely to be the most significant form of corruption . After the client and the contractor have made an agreement, the contractor will invoice a price that is above the market price or above the price that would have been determined in a regular, corruption-free tender .

Funds for kickbacks are partially withdrawn from the beneficiary by the beneficiary from his company via cash withdrawals. In addition, the assumption of costs for the beneficiary's expenses (e.g. vehicle repairs, house renovations, furniture purchase, etc.) and payments to letterbox companies are common practice.

Possible problems with kickback from the perspective of those involved (incomplete):

  1. In order to avoid traceability, transfers must normally be made in cash or at least in secret. For the contractor, this means having to make payments from “black coffers” - money that is irretrievably gone for him.
  2. Having made kick-back payments does not protect the contractor from further, later (subsequent) claims, for example from further, allegedly involved parties, which could otherwise cause considerable difficulties. A typical example: A corrupt president can be bribed for placing an order for a power plant . The provincial governor, who is in office for reasons of proportional representation of a fragile retention of power , is not involved; Those involved in the state (corrupt kick-back recipients) claim that there is no need for further payment recipients ... However, a main transport route for the equipment to be delivered leads through his territory. It is now easy for the governor to harass the transporters until he too gets his "share".
  3. the non-tax deductibility of the kick-back payment to the contractor,
  4. the prohibition of "useful expenses" according to the tax and possibly criminal laws of the contractor country
  5. Questions of long-term secrecy over long project implementation phases (change employees, change ministers, there are elections , there could be a revolution ...)
  6. the dubious ethics of such action.

In general, it can be said that where kickbacks are required, it is extraordinarily difficult to manage long-term projects successfully. The subsequent required "additional payments" can dramatically turn a project result calculation that was initially positive into a negative. Corruption thus means that economically viable projects are not implemented. Not least for this reason, corruption is one of the most important obstacles to growth and development.

The chances of kickbacks from the perspective of those involved (besides avoiding them completely):

  1. They can be decoupled backwards in time through ownership of the project success (example: if the power plant supplies electricity and this is sold, the energy minister receives his bonus from the current income instead of a kick-back immediately after the first project installment Project itself, and not just because of the " Bermuda money".)
  2. As a contractor, to always be in the plus with the money, always ahead of the deliveries and services in the project. Systematically and quickly stop any services if circumstances arise that could influence the contractors involved (with or without kick-back), circumstances that harbor the risk that the calculation will turn negative. Then namely the contractor has lost permanently; he can be put under pressure with the hope that by continuing the project à la longue, he may come back to positive territory. As a contractor, there is a great risk of “starving” to death using the shorter lever. Even corrupt clients do not go into such circumstances, because they are giving themselves up or the achievement of a project's goals is too much in the hands of the contractor. The contractor could, for his part, raise additional claims (justified or unjustified) (see claim management ).

See also

Web links and sources

Individual evidence

  1. ^ RG JW 1905, 118
  2. ↑ BGH, judgment of October 30, 1990, Az .: XI ZR 352/89
  3. ^ BGH, judgment of December 19, 2006 , Az .: XI ZR 56/05, full text.
  4. ↑ according to the BGH in a judgment on asset management from 2000
  5. ↑ OLG Stuttgart, judgment of March 16, 2011 , Az. 9 U 129/10, full text.
  6. ↑ BGH, decision of March 9, 2011 (PDF; 115 kB), Az.XI ZR 191/10, full text
  7. ↑ BGH, decision of July 19, 2011 (PDF; 65 kB), Az.XI ZR 191/10, full text.
  8. ↑ BGH, decision of August 24, 2011 (PDF; 119 kB), Az.XI ZR 191/10, full text.
  9. ^ Stiftung Warentest: Compensation for money investors, compensation for fund losses
  10. ↑ Tax treatment of retrocessions and kickbacks
  11. ↑ Online decision of the Supreme Court (OGH) of November 7, 2007, Az. 6 Ob 110 / 07f
  12. ↑ Union Investment, GenoEuroClassic, product information, as of October 31, 2012
  13. ↑ Union Investment, FairWorldFonds, product information, as of October 31, 2012
  14. ^ BGH, judgment of February 12, 2004, Az .: III ZR 355/02 and BGH, judgment of February 12, 2004, Az .: III ZR 359/02
  15. ^ BGH, judgment of January 20, 2009, Az .: XI ZR 510/07
  16. ^ BGH, judgment of December 19, 2006, Az .: XI ZR 56/05
  17. ^ BGH, decision of June 29, 2010, Az .: XI ZR 308/09 on Openjur.de
  18. ^ BGH, judgment of February 28, 1989, Az .: XI ZR 70/88; BGH, judgment of February 6, 1990, Az .: XI ZR 184/88
  19. ↑ all on BGH, judgment of March 9, 2011, Az .: XI ZR 191/10
  20. ↑ OLG Düsseldorf, judgment of July 8, 2010, Az .: I-6 U 136/09
  21. ^ LG Munich, judgment of February 25, 2010, Az .: I 22 O 1797/09
  22. ^ BGH, judgment of March 9, 2011, Az .: XI ZR 191/10
  23. ^ BGH, judgment of March 9, 2011, Az .: XI ZR 191/10
  24. ↑ also to Az. XI ZR 191/10