FIDLEG & FINIG: Tailor-made solutions for financial service providers
The most important in a nutshell
The Financial Services Act (FIDLEG) and the Financial Institutions Act (FINIG) will enter into force on 1 January 2020. The FIDLEG provides for rules of conduct for financial service providers that are more restrictive the higher the need for customer protection. The FINIG aims at a predominantly uniform supervisory regime for all financial service providers. Financial service providers not previously supervised are now subject to authorisation by FINMA, the Financial Market Supervisory Authority. Independent asset managers and trustees in particular are newly affected by the licensing requirement.
Our offer
Our services for financial service providers
Our experts support you in all matters relating to the new laws, e.g. in adapting your instruction system to the contracts you use, in applying for affiliation with a supervisory organisation and in licensing your company.
FinSA & FinIA Coaching
CapstoneLaw provides experienced sparring partners for a project steering committee
CapstoneLaw conducts FIDLEG & FINIG workshops tailored to your company’s needs
CapstoneLaw supports with difficult questions
FinSA & FinIA Training
Capstonelaw conducts training courses and seminars on FIDLEG & FINIG;
Capstonelaw supports the creation of training materials and web-based trainings.
FinSA & FINIA Health Check
FIDLEG & FINIG influences your organization, your processes and your instruction system. We help you to close the regulatory gaps:
CapstoneLaw conducts a health check and reviews proposed solutions;
CapstoneLaw prepares a heat map and gap reporting, identifies possible risks and suggests appropriate solutions;
CapstoneLaw reviews your current instruction and contract system and develops tailor-made statutes, regulations and standard contracts – based on our many years of practical experience.
FinSA & FinIA Project Support
FinSA & FinIa influences your organization, your processes and your instruction system. Capstonelaw supports you in mastering the challenges you face – if you click on it:
CapstoneLaw provides an experienced project team and takes over the project management;
CapstoneLaw provides impact/gap analysis and implementation support;
CapstoneLaw conducts a health check, analyses its organisational structure with a view to implementation on FIDLEG & FINIG and reviews proposed solutions;
CapstoneLaw prepares a heat map and gap reporting, identifies potential risks and suggests appropriate solutions.
Cross-Border Financial Services
Does your company provide cross-border financial services from abroad to Switzerland? Do you have a presence in Switzerland as a foreign financial institution or would you like to establish one? We will be happy to support you in your plans!
CapstoneLaw will support you:
the analysis of your cross-border activities (sales, asset management, etc.)
risk analysis and implementation project planning
Compliance Outsourcing
The new laws require an appropriate company organisation which can fulfil the legal obligations. Accordingly, independent compliance and risk management are required of every financial institution. But you want to keep the time and monetary burden on your company as low as possible? Take advantage of our many years of experience.
Filing for Membership of a Supervisory Organisation
Your company was previously an asset manager not requiring a license and you have to join a supervisory organization? CapstoneLaw supports you in the preparation and submission of your application for membership.
Licensing
According to FINIA, your company is now regarded as a Swiss or foreign financial institution requiring a licence and must submit a licence application to FINMA.
CapstoneLaw will help you:
the preparation of the FINMA licence application (including all enclosures)
Preparation of regulatory documents (company law documents, contracts, regulations and checklists)
Preparation of adequate instructions and contracts
In the field of FinSA Rules of Conduct
Initial Training for client advisers
FIDLEG
General information
How is the FIDLEG structured?
Title 1: General provisions (Art. 1 – 5 FIDLEG)
Purpose, subject matter and scope. This section defines, in particular, financial instruments, financial services and financial service providers, as well as customer segmentation.
Title 2: Requirements for the provision of financial services (Art. 6 – 34 FIDLEG)
Regulation of the requirement for the provision of financial services concerning (Chapter 1)) knowledge required, (Chapter 2) rules of conduct, (Chapter 3) organisation and (Chapter 4) the register of advisers.
Title 3: Offering of financial instruments (Art. 35 – 71 FIDLEG)
Regulations concerning the offer of a financial instrument and the obligation to publish a prospectus.
Fourth title: Publication of documents (Art. 72 – 73 FIDLEG)
Right to receive a copy of the customer dossier.
Title 5: Ombudsman services (Art 74 – 86 FIDLEG)
Rules concerning the principle and the procedure before the ombudsman.
Title 6: Supervision and exchange of information (Art. 87 – 88 FIDLEG)
Title 7: Penal provisions (Art. 89 – 92 FIDLEG)
Consequences of breaches of the rules of conduct, breaches of the rules governing prospectuses and basic information leaflets and the consequences of unauthorised offers of financial instruments.
Title 8: Final provisions (Art. 93 – 96 FIDLEG)
In particular, the final provisions contain provisions on transitional periods.
Who is subject to the FIDLEG?
Pursuant to Art. 2 para. 1 FIDLEG, the scope of application of the law refers – irrespective of its legal form – to financial service providers, client advisors, as well as creators and providers of financial instruments. Pension funds are not regarded as financial service providers. In particular, the investment foundations, the sole purpose of which is to manage pension assets, could be qualified on the basis of their function as financial service providers.
What is a financial services provider or client advisor?
- All persons providing financial services on a commercial basis are deemed to be financial service providers within the meaning of Art. 3 lit. d FIDLEG. The new regulations thus cover supervised market participants such as banks, investment firms, fund management companies, insurance companies as well as all asset managers.
- Client advisors within the meaning of Art. 3 lit. e FIDLEG are all employees of a financial service provider who provide financial services for clients. In other words, natural persons who provide financial services in their own name or in the name of a financial service provider. For example, employees of a bank who carry out transactions with financial instruments for bank customers or advise them on the investment of their assets are customer advisors within the meaning of this provision.
- Art. 2 para. 2 FIDLEG determines to which legal entities the FIDLEG does not apply.
When does business exist in connection with the provision of a financial service?
Commercial activity exists if the financial service provider carries out an independent economic activity aimed at permanent acquisition within the meaning of Art. 2 lit. b of the Commercial Register Ordinance of 17 October 2007 (HRegV).
A commercial activity is presumed to have taken place on the basis of the previous regulation in the Banking Ordinance if the financial services provider provides financial services for more than 20 customers or advertises the provision of financial services in advertisements, prospectuses, circulars or electronic media.
What is a financial instrument?
Financial instruments within the meaning of Art. 3 lit. a FIDLEG are deemed to be financial instruments:
- Equity and debt securities: The term equity security covers securities that confer equity and voting rights in public limited companies, i.e. in addition to shares in their various forms (cf. Art. 622 ff. OR), participation and dividend-right certificates (Art. 656a ff and Art. 657 OR), as well as securities such as convertible bonds, which contain the right to acquire shares or securities equivalent to these;
- Units in collective investment schemes pursuant to Art. 7 and 119 CISA, derivatives pursuant to Art. 2 FinfraG and structured products;
- Risk or price-dependent deposits: Initially, deposits are recorded where the redemption value is risk or price-dependent, as is the case with precious metal accounts, for example;
- Bonds as financial instruments: Bond obligations are portions of a total loan with uniform conditions with regard to interest rate, issue price, maturity, subscription period, hedging, etc.
Who can be a customer?
Customers may be natural or legal persons or partnerships as well as other legal entities formed under foreign law (e.g. trusts). The relationship between the financial service provider and the customer may be contractual or purely factual. Customers also include persons to whom the financial services provider first offers its services and with whom it has not yet agreed to provide the service.
Which customer categories does the FIDLEG create?
Following MiFID II and the existing provisions in the CISA (cf. Art. 10 CISA), FIDLEG provides for customer segmentation which distinguishes between private customers on the one hand and professional customers on the other. According to FIDLEG, institutional clients are regarded as a subgroup of professional clients.
What is a professional safe depository?
According to current practice, a professional treasury is to be affirmed if the company entrusts at least one professionally qualified person experienced in the financial sector with the permanent management of its financial resources.
Why does FIDLEG introduce customer segmentation?
The aim of customer segmentation is to combine each customer category with an appropriate level of protection. In other words, not all investors need to be equally protected from the risks of financial services. Different levels of protection are imposed due to different experiences and knowledge as well as financial circumstances of the clients. In this sense, private clients enjoy greater investor protection than professional clients, who in turn are better protected than institutional clients.
Pursuant to Art. 20 FIDLEG, the rules of conduct do not apply to transactions with institutional clients. Professional clients can explicitly waive the application of certain rules of conduct.
Who is responsible for classifying customers?
The financial services provider must assign its customers to the individual categories. The information provided by the client to the financial services provider is authoritative. If the financial service provider knows or suspects that the customer information is incorrect, he is obliged to ask the customer.
What are institutional clients?
A subgroup of professional clients is the group of so-called institutional clients.
Institutional clients within the meaning of Art. 4 para. 3 lit. a-d and Art. 4 para. 4 FIDLEG are deemed to be institutional clients:
- Financial intermediaries pursuant to the Banking Act, the Financial Institutions Act and the CISA;
- Insurance undertakings pursuant to the ISA;
- Foreign financial institutions subject to prudential supervision;
- Central banks;
What are private customers?
For the purposes of Art. 4 para. 2 FIDLEG, private customers are all customers who are not professional customers.
What is Opting-out?
In order to meet specific customer needs, the FIDLEG provides for the possibility of avoiding schematic customer segmentation to a certain extent.
Wealthy private individuals can declare within the meaning of Art. 5 para. 1 FIDLEG that they do not wish to benefit from the higher level of protection afforded by the status of private customer (opting out).
Pursuant to Art. 5 para. 2 FIDLEG, private clients who (a) credibly declare that they have assets of at least CHF 500,000 and can assess the risks of a financial service on the basis of their knowledge and experience or (b) have assets of at least CHF 2,000,000 are entitled to opt-out.
What is Opting-in?
Customers who, by law, are not subject to the increased level of protection of their retail customer status must be informed by the financial service provider of the possibility of opting in (Art. 5 para. 7 FIDLEG).
Opting-in is understood to mean the possibility of professional clients who are not institutional clients being able to submit to the increased level of protection of their retail client status by means of a written declaration (Art. 5 para. 5 FIDLEG).
Why is customer segmentation relevant?
Customer segmentation is relevant in several respects. For example, certain obligations of conduct do not apply to the provision of financial services to institutional clients (Art. 20 FIDLEG).
Specifically, when dealing with institutional clients, only the general duties to provide information, the provisions on accountability as well as the transparency and due diligence duties need to be complied with. In particular, no suitability or appropriateness test is required for financial services to institutional clients. The FIDLEG also provides certain facilities for the provision of services to professional clients, such as aptitude and appropriateness tests. In addition, customer segmentation is also important for the design of product documentation (e.g. in connection with exemptions from the prospectus requirement or the scope of application of the basic information sheet).
Which duties of conduct are mentioned in the FIDLEG?
With the entry into force of FIDLEG, financial service providers will be subject to a series of rules of conduct which they must comply with when providing financial services. These rules of conduct can be divided into the following groups:
- Information obligations (Art. 8 f. FIDLEG);
- Obligation to carry out aptitude and appropriateness tests (Art. 10 et seq. FIDLEG);
- Documentation and accountability obligations (Art. 15 f. FIDLEG);
- Transparency and due diligence obligations (Art. 17 et seq. FIDLEG).
Professional clients can dispense with the observance of certain rules of conduct. The rules of conduct do not apply to institutional clients.
What is the obligation to provide information?
The FIDLEG provides for various information obligations (Art. 8 FIDLEG and Art. 9 FIDLEG) which financial service providers will have to fulfil in future before concluding contracts or providing services. In future, financial service providers will have to inform customers about their identity, their field of activity and any economic ties, among other things. The duty to provide information also includes information on the services and financial instruments offered and their risks.
What is documentation and accountability?
The documentation and accountability obligations (Art. 15 and 16 FIDLEG) are intended to give the customer a better insight into the service provided by the financial services provider.
The financial service provider must be able to provide information to the supervisory authority at any time. As part of this documentation obligation, the financial service provider must also give reasons for its recommendation to sell or purchase financial products.
The documentation and accountability obligations (Art. 15 and 16 FIDLEG) are intended to provide customers with a better insight into the services provided by financial service providers.
The financial service provider must be able to provide information to the supervisory authority at any time. As part of this documentation obligation, the financial service provider must also document the reasons for which the purchase or sale of financial products was recommended or executed.
The documentation and accountability obligations (Art. 15 and 16 FIDLEG) are intended to give the customer a better insight into the service provided by the financial services provider.
The financial service provider must be able to provide information to the supervisory authority at any time. As part of this documentation obligation, the financial service provider must also give reasons for its recommendation to sell or purchase financial products.
The documentation and accountability obligations (Art. 15 and 16 FIDLEG) are intended to provide customers with a better insight into the services provided by financial service providers.
The financial service provider must be able to provide information to the supervisory authority at any time. As part of this documentation obligation, the financial service provider must also document the reasons for which the purchase or sale of financial products was recommended or executed.
Is compliance with the duties of conduct checked?
Yes, compliance with the duties of conduct is checked by the supervisory authority and sanctions are imposed in the event of non-compliance. In addition, the FIDLEG provides for criminal liability for those persons who intentionally or negligently disregard the duties of conduct.
FINIG
General information
General information about FINIG
Aim and purpose
FINIG aims at the uniform regulation of the licensing requirements for financial institutions. All asset managers should be subject to prudential supervision. The regulations on supervision are kept general in the FINIG and are thus intended to create a comparable supervisory regime for the supervised entities.
At present, the licensing requirements of the various financial service providers are regulated in various decrees. These provisions, which are already in force, will be transferred to the FINIG without any material changes. The licensing provisions of the various financial service providers are now contained in a single law.
Structure of the FINIG
Chapter 1: General Provisions (Art. 1-16 FINIG)
The first section of this chapter defines the subject matter, purpose and scope. The common provisions include, among other things, the location of the financial institution’s management, the guarantee of proper business activity and the ombudsman. The licensing requirements for financial institutions are also regulated in Chapter 1. Further licensing requirements for the specific financial institutions can be found in Chapter 2.
Chapter 2: Financial institutions (Art. 17-60 FINIG)
Chapter 2 is divided into 6 sections:
- Section: Asset managers and trustees (Art. 17-23 FINIG)
- Section: Managers of collective assets (Art. 24-31 FINIG)
- Section: Fund management companies (Art. 32-40 FINIG)
- Section: Investment firms (Art. 41-51 FINIG)
- Section: Branches (Art. 52-57 FINIG)
- Section: Representations (Art. 58-60 FINIG)
Chapter 3: Supervision (Art. 61-67 FINIG)
Chapter 4: Liability and penalties (Art. 68-71 FINIG)
Chapter 5: Final provisions (Art. 72-75 FINIG)
To which financial institutions does FINIG apply?
Pursuant to Art. 2 para. 1 FINIG, financial institutions within the meaning of the FINIG are deemed to be financial institutions:
- Asset managers (Art. 17 para. 1 FINIG)
- Trustees (Art. 17 para. 2 FINIG)
- Manager of collective assets (Art. 24 FINIG)
- Fund management companies (Art. 32 FINIG)
- Investment firms (Art. 41 FINIG)
To which financial institutions does FINIG not apply?
Art. 2 para. 2 FINIG lists the financial service providers that are not covered by the FINIG. Single family offices, SICAVs, SICAFs and limited partnerships for collective investment schemes are then not covered by the scope of the FINIG.
Persons who work exclusively in investment advisory services are not covered by the scope of the FINIG. However, the provisions of FIDLEG (Art. 28 et seq. FIDLEG) must be observed.
Who is considered an independent asset manager?
Pursuant to Art. 17 para. 1 FINIG, an asset manager is anyone who, on the basis of an order, is able to dispose commercially of the client’s assets in the name and for the account of the client.
Managers of collective assets who manage assets of collective investment schemes or pension funds that do not exceed the thresholds pursuant to Art. 24 para. 2 FINIG shall be regarded as asset managers.
Who’s considered a trustee?
Pursuant to Art. 17 para. 2 FINIG, a trustee is a person who, on the basis of the instrument of constitution of a trust within the meaning of the Hague Convention, manages or disposes of the law applicable to trusts and their recognition as special assets for the benefit of the beneficiaries or for a specific purpose.
You are a trustee or an independent asset manager; which transitional provisions must be observed?
Independent asset managers and trustees now require FINMA approval. They shall report to FINMA within 6 months of the FINIG coming into force. Within 3 years of the FINIG coming into force, independent asset managers and trustees must meet the requirements and submit a licence application. They may continue their activities until a decision is taken on the licence, provided that they are affiliated to a self-regulating organisation pursuant to Art. 24 AMLA and that they are supervised by that self-regulating organisation with regard to compliance with the relevant obligations.
Independent asset managers and trustees who commence their activities within one year of the FINIG taking effect must report immediately to FINMA and meet the licensing requirements from the commencement of their activities, with the exception of proof of affiliation to a supervisory organisation pursuant to Art. 7 para. 2 FINIG. No later than one year after FINMA has approved a supervisory organisation pursuant to Art. 43a FINMA Act, they must join such a supervisory organisation and submit an application for approval. They may continue their activities until a decision is taken on the licence, provided that they are affiliated to a self-regulating organisation pursuant to Art. 24 AMLA and that they are supervised by that self-regulating organisation with regard to compliance with the relevant obligations.
You are a manager of collective assets with a license under the CISA; what changes must be taken into account?
The FINIG divides the managers of collective assets into two categories:
- Managers of pension plan assets
- Manager of collective investment scheme assets
Under the applicable provisions of the CISA, asset managers of collective investment schemes require FINMA approval as asset managers of collective investment schemes. These do not require a new licence, but must meet the FINIG requirements within one year of their entry into force.
You are a representative of foreign collective investment schemes; what changes need to be taken into account?
Representatives of foreign collective investment schemes offered in Switzerland exclusively to qualified investors do not require FINMA approval. If foreign collective investment schemes are offered to wealthy clients pursuant to Art. 5 para. 1 FIDLEG or to non-qualified clients, FINMA is required to obtain a licence.
You are a distributor according to KAG; which changes have to be considered?
Distributors do not require FINMA approval and are not supervised by FINMA. The corresponding provisions are deleted from the CISA without replacement. However, a distributor must observe the rules of conduct according to FIDLEG.
You are a Family Office; what changes do you need to take into account?
The FINIG does not apply to persons who exclusively manage the assets of persons economically or family-related to them (Art. 2 para. 2 lit. a FINIG). This includes in particular so-called single family offices. These do not require FINMA approval.
If a Family Office works for several customers, it is a Multi Family Office. In future, these will require a licence as asset managers pursuant to Art. 17 para. 1 FINIG.
Initial Training for client advisers in the field of FinSA Rules of Conduct
CAPSTONELAW Zurich is offering mandatory training for Client Advisers who shall be enrolled in theRegister of Client Advisers maintained by the stock exchange Bern in accordance with Art. 28 et seq. of the Federal Act on Financial Services of 15 June 2018 (“FinSA”).
