16 May 2017 / article

Need-to-know on new Swiss financial regulations

Two new acts will significantly change the regulatory environment for financial services providers in Switzerland: The Financial Services Act and the Financial Institutions Act will introduce new investor protection provisions and new licensing requirements for asset managers.

The dispatch of the Financial Services Act (FinSA) and the Financial Institutions Act (FinIA) was adopted in 2015 with a view to eliminate current shortcomings in the area of conduct rules, product regulations and licensing requirements.

Impact of FinSa

The most significant changes FinSa will bring are the following:

  • It will introduce cross-sector rules for financial services and the distribution of financial instruments;
  • A client categorization will allow different levels of protection based on the investor’s background and experience;
  • Transparency requirements will lay down the information to be provided to the prospect or client; and
  • Services may be provided following the execution of a suitability and appropriateness evaluation only (exceptions apply, e.g. for the servicing of professional clients).

Other key changes due to FinSA

Furthermore, current prospectus requirements will be amended and unified for the different categories of financial instruments. In addition, a key information document will need to be provided to investors to enable them to take informed investment decisions. Any private law requirements will be considered fulfilled when the financial service provider is compliant with FinSA. Finally, the position of the ombudsman will be strengthened, to encourage the settling of disputes without costly court proceedings.

FinIA

A new supervisory regime for financial services providers will be introduces with FinIA. The most significant novelty will be the newly applicable licensing and supervision of asset managers. The most recent draft version of FinIA (as amended by the National Council) foresees the supervision of asset managers and trustees by supervisory organisations.

EU market access by way of equivalence?

The main purpose of FinSA and FinIA is to elevate the Swiss regulatory framework to international standards in terms of investor protection. The legislator drafted the acts with a view to the European regulatory framework: Be it MiFID II/MiFIR, PRIIPs or the Prospectus Regulation– the Swiss regulation shall be compatible with that in the EU. For the Swiss financial center, the equivalence provision in article 47 MiFIR is of greater interest: If the third country regulation is considered as equivalent by the EU Commission, investment firms from this third country may provide their services to professional clients on a cross-border basis throughout the EU. As long as no such decision has been taken and with regard to the servicing of retail clients, the national cross-border regimes continue to apply.

Political considerations

Switzerland strives for the recognition of equivalence by implementing FinSA / FinIA provisions which are similar to those in MiFID II. However, the granting of a positive equivalence decision is not only a question of technical equivalence, but also of political considerations.

Despite the political influences, FinSA / FinIA will represent the cornerstone for the equivalence assessment and ensure that Switzerland has a realistic chance to be considered as equivalent.

Status of the new regulations

After significant changes to the original draft act by the Council of States in 2016, also the National Council amended the act in 2017. Due to differences between the versions of the two chambers, the Council of States will have to discuss and pass it again. The acts will not enter into force before 2019 and are still subject to changes in the parliamentary process.

 

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