Trustees and portfolio managers are subject to a licensing requirement and prudential supervision following the entry into force of the Financial Institutions Act (FinIA) on 1 January 2020. The scope of activity of specific trustees and portfolio managers may, however, be very limited in scope and the requirements of the FinIA may be disproportionate in the light of its purpose in specific cases. The FinIA and the Financial Institutions Ordinance (FinIO) address these cases to some extent by specific exemptions.

By Alexander Greter (Reference: CapLaw-2020-40)

FinIA has consolidated the authorisation regime for all financial institutions (except for banks which remain to be regulated under the Banking Act) and has extended this regime to independent asset managers and trustees. Even though the new law provides for a smooth transitional period enabling financial institutions to cope with the new regulation, asset managers and trustees now falling under the new regime are or have been required to file a report with the Swiss regulator FINMA. This article outlines the duty to report and its consequences.

By Matthias Lötscher / Pascal Zysset (Reference: CapLaw-2020-23)

On 1 January 2020, the Federal Act on Financial Institutions of 15 June 2018 (FinIA) will enter into force together with the Federal Act on Financial Services (FinSA). The FinIA revises the regulatory architecture for financial institutions. Instead of the current sectorial approach, the FinIA proposes to introduce a regulatory pyramid with a light regulatory framework for asset managers and trustees, and an increasingly more stringent regime for managers of collective assets, securities firms – the new denomination for securities dealers – and, at the top, banks, although they will be continue to be governed by the Federal Act on Banks and Saving Banks of 8 November 1934 (Banking Act, SR 952.0) and remain out of scope of the FinIA. Furthermore, the FinIA introduces several new regulatory regimes: it subjects portfolio managers and trustees to prudential supervision and extends the current regime applicable to asset managers of collective investment schemes to asset managers of pension funds. Moreover, it recasts the existing regime applicable to securities dealers under the Federal Act on Stock Exchanges and Securities Dealing of 24 March 1995 (SESTA, SR 954.0) into a slightly modified new regime for securities firms. This article updates the previous versions now that the Federal Council passed the Ordinance on Financial Services of 6 November 2019 (FinSO) and the Ordinance on Financial Institutions of 6 November 2019 (FinSO)

By Rashid Bahar (Reference: CapLaw-2019-57)

Under the new Financial Institutions Act (FinIA) entering into force on 1 January 2020, portfolio managers and trustees will have to apply for a license with the Swiss Financial Market Supervisory Authority (FINMA) and become subject to ongoing prudential supervision by new supervisory organizations (SO). After the Swiss parliament passed the new legislation in June 2018, the Swiss Federal Department of Finance (FDF) released its draft implementing ordinance (Draft-FinIO) for consultation in October 2018. On 6 November 2019, the Federal Council adopted the final version of the Financial Institutions Ordinance (FinIO) as well as the implementing ordinance to the new Financial Services Act, and set the entry into force of the new regulation for 1 January 2020. The final FinIO contains various relevant changes for portfolio managers and trustees compared to the Draft-FinIO. Against the background of the imminent entering into force of the new legislation, the purpose of this article is to provide a summary of the license requirements for portfolio managers and trustees as well as the applicable transitional periods.

By Patrick Schleiffer / Ramona von Riedmatten  (Reference: CapLaw-2019-58)

On 15 June 2018, the Federal Act on Financial Institutions was passed into law. The FinIA revises the regulatory architecture for financial institutions. Instead of the current sectorial approach, the FinIA proposes to introduce a regulatory pyramid with a light regulatory framework for asset manager and trustees, and an increasingly more stringent regime for managers of collective assets, securities firms – the new denomination for securities dealers – and, at the top, banks, although they will be continue to be governed by the Federal Act on Banks and Saving Banks of 8 November 1934 (Banking Act, SR 952.0) and remain out of scope of the FinIA. Furthermore, the FinIA introduces several new regulatory regimes: first of all, it subjects portfolio managers and trustees to prudential supervision. Second, it extends the current regime applicable to asset managers of collective investment schemes to asset managers of pension funds. Third, it recasts the existing regime applicable to securities dealers under the Federal Act on Stock Exchanges and Securities Dealing of 24 March 1995 (SESTA, SR 954.0) into a slightly modified new regime for securities firms. Fourth, it amends the Banking Act to introduce a new regulatory status for persons who hold public deposits of a total amount of less than CHF 100 million without engaging in commercial banking by lending the funds on (article 1b Banking Act). Finally, it also amends other regulations, including the Federal Act on Consumer Credits of 23 March 2001 (SR 221.214.1).

By Rashid Bahar (Reference: CapLaw-2018-64)

Under current Swiss law, portfolio managers and trustees are not subject to a comprehensive prudential supervision, a situation that will change under the recently passed new Financial Institutions Act (FinIA). After the Swiss parliament passed the new legislation in June 2018, the Swiss Federal Department of Finance released its draft implementing ordinance (Draft-FinIO) for consultation. Under the new legislation, portfolio managers and trustees will have to apply for a license from the Swiss Financial Market Supervisory Authority (FINMA) and they will be subject to ongoing prudential supervision by new supervisory organizations. The FinIO specifies the license requirements for portfolio managers and trustees, taking into account the nature of these businesses and providing a certain amount of flexibility with respect to the requirements to be fulfilled by smaller businesses. While the new rules will come as a challenge for many of the existing portfolio managers and trustees, the FinIA and the FinIO also provide for transitional periods allowing these existing portfolio managers and trustees to transition gradually into the new regulatory regime.

By Patrick Schleiffer / Patrick Schärli (Reference: CapLaw-2018-65)

After a long wait in the Committee on Economic Affairs and Taxation, the Council of States, the upper chamber of the Swiss parliament, approved in its 2016 winter session the bill for a Federal Act on Financial Institutions (FinIA) as well as amendments of other statutes, such as the Federal Act on Banks and Saving Banks of 8 November 1934 and the Federal Act on the Swiss Financial Market Supervisory Authority of 22 June 2007. This approval allows this bill to move forward to the National Council, the lower chamber of the Swiss parliament.

Overall, the bill on the FinIA and its schedules, as approved by the Council of States, remains close to the draft bill presented by the Federal Council (see CapLaw-2016-7). Most changes seek to clarify the project rather than challenge fundamentally the initial proposal. Two exceptions deserve, however, further attention: first, the Council of States refused to create a framework for a new supervisory authority solely responsible for supervising portfolio managers. Instead, it opted to draw a line between day-to-day supervision, which is due to be entrusted to a new supervisory authority, who in turn can rely on the work of audit firms or carry out their own reviews, and more supervisory actions such as licensing and enforcement action, which will remain with FINMA.

By Rashid Bahar (Reference: CapLaw-2017-06)

Under current Swiss law, portfolio managers, unless they are acting as asset managers for collective investment schemes, and trustees are not subject to a comprehensive prudential supervision, a situation that will change under the proposed new Financial Institutions Act (“FinIA”). On 14 December 2016, this proposed new act took the first parliamentary hurdle when the Swiss Council of States deliberated and passed the new act. Compared to the draft bill published by the Swiss government in November 2015 (see CapLaw 2016-8), the draft FinIA now passed by the Swiss Council of States includes a number of significant changes to the new supervisory framework applicable to portfolio managers and trustees. Most notably, portfolio managers and trustees will have to apply for a license with the Swiss Financial Market Supervisory Authority (FINMA), while the ongoing (day-to-day) prudential supervision of these financial institutions will fall within the responsibility of new private supervisory organizations.

By Patrick Schleiffer / Patrick Schärli (Reference: CapLaw-2017-07)

On 4 November 2015, the Federal Council published a Bill to parliament for a Financial Services Act (FinSA) and a Financial Institutions Act (FinIA). As expected, the FinIA proposes to revise the regulatory architecture for financial institutions. Instead of the current sectorial approach, the FinIA proposes to introduce a regulatory pyramid with a light regulatory framework for asset manager and trustees, and an increasingly more stringent regime for collective asset, securities houses and, at the top, banks.

By Rashid Bahar (Reference: CapLaw-2016-7)