New Swiss financial market rules: a guide
Homburger lawyer Eduard De Zordi explains what financial service providers need to know about the new rules, which are now in effect
On January 1 2020, the Financial Services Act (the FinSA) and the Financial Institutions Act (the FinIA) entered into effect in Switzerland. Numerous provisions of the FinSA and the FinIA, however, did not become effective immediately, because new institutions envisaged under the FinSA and the FinIA were not yet in place. The countdown on certain transition periods provided for by the FinSA and the FinIA has only started to run from the time these new institutions were in place. In the meantime, the Swiss Financial Market Supervisory Authority FINMA (FINMA) has approved these institutions and the transition periods are running.
As a result, Swiss and non-Swiss parties that are subject to these new Swiss financial market regulations are now required to take action. With regard to non-Swiss parties, this will include, in particular, financial service providers that offer financial services to clients in Switzerland (see below, registration bodies and ombudsman's offices) and parties involved in public offers and/or admissions to trading of securities on a trading venue in Switzerland (see below, reviewing bodies).
New institutions under the FinSA and the FinIA
Registration bodies: The registration bodies are provided for in the FinSA. They maintain the registers on which Swiss and non-Swiss client advisers are required to register if they provide financial services in or from Switzerland. The registration bodies are approved by FINMA.
Reviewing bodies: The reviewing bodies are provided for in the FinSA. They are the new Swiss prospectus approval authorities. Prospectuses approved by a reviewing body are required for the purposes of a public offer or an admission to trading of securities on a trading venue in Switzerland. The reviewing bodies are also approved by FINMA.
Ombudsman's offices: The ombudsman's offices are provided for in the FinSA. Swiss and non-Swiss financial service providers that provide financial services in or from Switzerland are obliged to affiliate themselves with an Ombudsman's office to provide for a mediation procedure for legal disputes between clients and financial service providers. The Ombudsman's offices need to be recognised by the Swiss Federal Department of Finance.
Supervisory organisations: The supervisory organisations are provided for in the FinIA. They supervise Swiss asset managers and trustees. The supervisory organisations need to be approved by FINMA.
Client advisers of Swiss financial service providers that are not already subject to prudential supervision, and client advisers of non-Swiss financial service providers that provide services in Switzerland, are obliged to register as client advisers. The registers of client advisers are maintained by registration bodies. The registration bodies also verify that the client advisers have completed the necessary training and further education.
Client advisers of non-Swiss financial service providers which are (a) prudentially supervised outside Switzerland and (b) provide services in Switzerland only to professional or institutional clients (as defined in the FinSA) are exempt from the duty to register as client advisers.
FINMA approved BX Swiss Ltd as the first registration body with effect as of July 20 2020. The approval of further registration bodies is expected.
The FinSA provides for a six-month transition period after the approval of the first registration body for the entry of the client advisers in a register maintained by a registration body. This transition period ends on January 19 2021. In order to meet this deadline, the client advisers need to file their application for entry in a register with a registration body by the end of the transition period.
The reviewing bodies are responsible for the review and approval of prospectuses under the FinSA. The FinSA prospectus requirements apply if securities are publicly offered and/or admitted to trading on a trading venue in Switzerland. An approved prospectus is required before the public offer or application for admission to trading, except in the cases of certain types of securities – such as most bonds – where the review and approval of the prospectus by the reviewing body can occur after the closing of the transaction, but only if a Swiss bank or securities firm confirms prior to the launch of the offering or the application for admission to trading that the most important information on the issuer and the securities is available.
FINMA approved SIX Exchange Regulation Ltd and BX Swiss Ltd as reviewing bodies with effect as of July 1 2020.
Prospectuses of securities that will be listed on SIX Swiss Exchange will typically be submitted to SIX Exchange Regulation Ltd as reviewing body, and prospectuses of securities that will be listed on BX Swiss will typically be submitted to BX Swiss Ltd as reviewing body. However, the approval by either reviewing body is sufficient for the admission to trading on any trading venue in Switzerland.
FINMA approved BX Swiss Ltd as the first registration body with effect as of July 20
The FinSA provides for a six-month transition period after the approval of the first reviewing body. During this transition period, the prospectus requirements under the FinSA do not yet mandatorily apply, provided that the Swiss prospectus requirements that were in effect before the FinSA came into effect are complied with. This transition period ends on November 30 2020.
From the end of the transition period, the prospectus requirements of the FinSA need to be fully complied with. Public offers of securities in Switzerland and the admission to trading of securities in Switzerland will require either (a) a prospectus, according to the FinSA and the annexes of the implementing ordinance, approved by a reviewing body or (b) in the case of securities that are eligible for the exception from this ex ante approval requirement, the confirmation by a Swiss bank or securities house that the most important information on the issuer and the securities is available, with the approval of the prospectus to follow after the closing of the transaction.
If transactions are planned in Switzerland between now and November, particular attention needs to be paid to the transition period. The transition period is only available for transactions that are completed by the end of November. If, for example, a transaction was otherwise completed by the end of November but the admission to trading occurred afterwards, such a transaction would be subject to the FinSA prospectus requirements.
Under the FinSA, clients of Swiss and non-Swiss financial service providers which offer financial services in or from Switzerland shall have an ombudsman procedure available to settle disputes of clients with the financial service providers. For this purpose, the financial service providers are obliged to affiliate themselves with an ombudsman's office recognised by the Swiss Federal Department of Finance.
Currently there are no exceptions to this obligation of financial service providers to enter into an affiliation with an ombudsman's office. However, there is a proposal in the Swiss Parliament to amend the FinSA to provide an exemption for financials service providers which provide services only to professional or institutional clients (as defined in the FinSA).
The Swiss Federal Department of Finance recognized the first four Ombudsman's Offices with effect as of June 24 2020. In the meantime, three further ombudsman's offices have been recognised, and the recognition of further ombudsman's offices is expected.
One of the recognised ombudsman's office is the well-established Swiss Banking Ombudsman, which was set up in 2003 by the Swiss Bankers Association for disputes between members of the association and their clients, long before this was required by the FinSA. Also, now, after recognition as an ombudsman's office under the FinSA, only members of the Swiss Bankers Association are eligible for affiliation with the Swiss Banking Ombudsman. Most of the other recognised ombudsman's offices, such as for example the Swiss Chambers' Arbitration Institution (SCAI), are open for affiliation by all types of financial service providers under the FinSA.
The FinSA provides for a six-month transition period after the recognition of the first ombudsman's office for the affiliation of the financial services providers with a recognised ombudsman's office. The transition period ends on December 23 2020. In order to meet this deadline, financial services providers need to file a completed affiliation request with a recognised ombudsman's office by the end of the transition period.
Swiss asset managers (other than asset managers of collective investment schemes) and trustees were not subject to regulation in Switzerland (with the exception of anti-money laundering regulations) until the FinIA entered into effect. According to the FinIA, such asset managers and trustees have to be (a) supervised by a supervisory authority approved by FINMA and (b) be licensed by FINMA.
If transactions are planned in Switzerland between now and November, particular attention needs to be paid to the transition period
FINMA approved two supervisory authorities (Organisme de Surveillance des Instituts Financiers and Organisation de Surveillance Financière) with effect as of July 6 2020, and a third supervisory organisation thereafter (Organisme de Surveillance pour Intermédiares Financiers & Trustees). The approval of further supervisory organisations is expected.
In respect to asset managers and trustees which became subject to the FinIA at its entry into effect on January 1 2020, the FinIA provides for a three-year transition period to comply with the requirements of the FinIA, including affiliation with a supervisory authority, and to submit a licence application to FINMA. Until the decision from FINMA regarding their licence application, they may continue to conduct their activities, as long as they comply with the applicable anti-money laundering regulations. In addition, such asset managers and trustees were obliged to report to FINMA until June 30 2020.
In respect to asset managers that commenced their activity within one year of the FinIA entering into effect, the FinIA provides for a one-year transition period after the approval of the first supervisory organisation for the asset managers and trustees to join a supervisory authority and file a licence application with FINMA. This transition period ends on July 5 2021. In order to meet this deadline, the asset managers and trustees need to affiliate with a supervisory organisation and submit an application for authorisation to FINMA by the end of the transition period. In addition, such asset managers and trustees are obliged to report to FINMA without delay, as soon as they commence their activities, and satisfy all the requirements of the FinIA with the exception of the affiliation with a supervisory organisation.
Eduard De Zordi
T: +41 43 222 16 57
Eduard De Zordi's practice focuses on banking, financial and capital markets law.
He specialises in particular in offerings of debt securities. He also advises on contract and company law.
Eduard De Zordi is registered at the Bar of the Canton of Zurich and is an authorised issuers' representative at the SIX Swiss Exchange.