The Swiss firm said it has taken a number of measures to address the problems that were found. There were no signs of the firm intentionally taking part in potential money laundering or tax fraud, it said.

Switzerland’s financial regulator has ordered Zurich-listed Leonteq, a structured products and insurance products firm, to disgorge SFr9 million ($10.2 million) of profits after shortcomings came to light in the way the firm distributed its products. 

Leonteq has “fully cooperated with FINMA and regrets the shortcomings identified,” the firm said, regarding its interaction with the Swiss Financial Market Supervisory Authority on the case. “The company has already taken comprehensive organisational measures over the past years, as also acknowledged by FINMA. Leonteq will implement the additional measures ordered by FINMA with high priority. Leonteq now expects profit before taxes for 2024 to be in the single-digit millions.”

FINMA has ordered a range of organisational measures to remediate shortcomings identified at Leonteq in the distribution of its financial products through a few distributors abroad. Among others, in future Leonteq will only conduct business with distributors that are subject to regulation. It has discontinued distribution relationships with a few unregulated distributors which today account for less than 0.5 per cent of Leonteq’s annual net fee income, the firm said in a statement. 

In its own statement yesterday, FINMA said: “Based on external information, press reports and reports from Leonteq AG itself, FINMA opened enforcement proceedings against the Leonteq Financial Group (LTQ) in 2023, which it has now concluded. FINMA found that the financial institution had seriously breached its risk management obligations and the obligations to ensure suitability. LTQ cooperated well with FINMA during the proceedings.”

Leonteq’s own products are primarily sold indirectly via external distributors. 

FINMA said its probe into the firm showed that Leonteq had “inadequately monitored its distribution chain.” “The financial group also worked with dubious, unregulated distributors in some cases. The business model of these distributors was not scrutinised sufficiently during onboarding, although various contradictions arose. Subsequently, some of these distributors later sold structured investment products in countries for which they were not contractually authorised and for which they did not have a licence. In doing so, the distributors violated not only contractual but also regulatory provisions, thereby exposing LTQ to considerable risks,” FINMA said. 

The regulator said its order of profit disgorgement was not yet legally binding.

Disgorgement
The profit disgorgement decreed by FINMA relates to transactions with two former distributors in the period from January 2018 to June 2022.

FINMA's probe was triggered by a disclosure by the company as well as allegations raised by the media and third parties. Some allegations have turned out to be unfounded and in particular there is “no indication that Leonteq intentionally participated in any potential money laundering or tax fraud,” Leonteq said.

As stated in its half-year 2024 results, Leonteq undertook a programme over the last few years to strengthen its global compliance and risk management framework. 

“The deficiencies in our risk management in the face of rapid growth should not have happened,” Lukas Ruflin, CEO of Leonteq, said “We regret the shortcomings identified and will continue to further strengthen our internal control system.”

From July to November 2024, Leonteq processed more than 108,000 client transactions (up 34 per cent year-on-year), and total turnover amounted to about SFr9.8 billion, rising 27 per cent compared with the same period last year.

Leonteq will publish its full-year 2024 results on 6 February 2025.

In late July this year, the firm said Lukas Ruflin, a founder and its CEO, had decided to step down once a successor was named. Ruflin’s announcement came on the same day that the business swung back into a net profit of SFr15.7 million ($17.8 million) in the first half of 2024, versus a loss of SFr8.2 million. Leonteq’s board of directors proposes to elect Ruflin to the board at the firm’s AGM in 2025. The board’s chair will decide on how to search for a new CEO.

Ruflin was one of the co-founders of Leonteq in 2007 and remains the company’s second largest shareholder. He served on Leonteq’s board of directors from 2009 and was vice-chairman from 2015 to 2018. In 2018, he agreed to the board of directors’ request to take on the CEO role for about five years.