Cross-Border Financial Services into Switzerland Organizational Requirements
5 August 2019
The Financial Services Act of June 15, 2018 (“FINSA”) introduces a set of regulatory requirements on the organization of foreign financial service providers. The final ordinance (“FISO”) for the implementation of the FINSA regulation is scheduled for 6 November 2019. The entry into force is scheduled for 1 January 2020.
For financial service providers with an OECD home country supervisor, such foreign rules should be considered as lex specialis and override the rules set out in the FINSA.
The staff of a foreign financial service provider rendering financial services to Swiss clients that falls within the scope of the FINSA must possess the necessary skills, knowledge and experience to perform its work.
In case an external asset manager mandates another financial service provider, for instance an account bank to supply financial services for its clients, the former remains liable for completeness and accuracy of the rules of conduct even if the account bank itself is subject to the FINSA.
Under the FINSA, foreign service providers rendering services to Swiss clients must take appropriate organizational precautions to prevent conflicts of interest or, where a conflict of interest cannot be avoided, to disclose this fact to the client. Investment firms or financial advisors for example have already been familiar with this subject since the implementation of the MIFID I directive in 2007.
Under the FINSA, financial service providers may accept benefits from third parties if they have expressly informed the clients of benefits (disclosing the existence, nature and amount of the benefits or the method of calculating) and the clients have waived such benefits in advance even though the MIFID II directive in 2018 generally prohibits that the firms providing portfolio management and/or independent investment advisory services accept and retain benefits from third parties.
Client advisers of foreign financial service providers may carry out their activities in Switzerland only after entry in the register of client advisers. This requirement only applies if the advisor’s involvement reaches a certain substance. It is expected under the FISO that this obligation will only apply when serving private clients.
In order to be registered, Client advisers must fulfil some requirements; in a non-exhaustive manner, they must have i) sufficient and necessary expertise and knowledge of the Swiss rules of conduct e.g. under the FINSA, ii) a professional indemnity insurance or provided equivalent guarantees and iii) they must prove that they are affiliated to an ombudsman.