Financial Services Act and Financial Institutions Act: Federal Council takes note of consultation results and takes initial decisions on direction to be taken

Bern, 13.03.2015 - the Federal Council took note of the results of the consultation on the Financial Services Act (FinSA) and the Financial Institutions Act (FinIA). It instructed the Federal Department of Finance (FDF) to carry out various adjustments in particular to enforcement and to draw up a dispatch by the end of the year.

The FinSA governs the prerequisites for providing financial services and offering financial instruments and facilitates the enforcement of customers' claims against financial service providers. The FinIA makes provision for a differentiated supervisory regime for financial institutions. The new guidelines should result in a strengthening of client protection, enhance the competitiveness of the financial centre and, by creating a level playing field, reduce competitive distortions between providers.


Both of the preliminary drafts were positively received by the majority of the consultation participants. However, serious reservations were expressed in part about individual areas. For example, the rule on the reversal of the burden of proof, the procedural costs fund and the arbitration court were clearly rejected together with the instruments of collective legal protection limited to financial services. The client advisor register in its present form was also controversial. The rule on disclosure of the compensation of financial service providers (e.g. retrocessions) was hotly debated. The proposals ranged from a complete ban on retrocession payments to abandoning the rule in the preliminary draft. In the FinIA in particular, the rule on enhanced due diligence requirements relating to clients' tax compliance was rejected.

The Federal Council has taken initial decisions on the direction to be taken on the controversial topics in the consultation procedure. In addition to the reversal of the burden of proof, the procedural costs fund and the arbitration court will also be eliminated. Access to a court of law is to be facilitated with a new cost settlement rule without cross-financing amongst financial service providers, whereby the financial service providers, subject to certain conditions, will pay the plaintiff costs themselves regardless of the outcome of proceedings. The regulations on the instruments of collective legal protection (group settlement proceedings and representative action) will be integrated in the corresponding work on adapting the Civil Procedure Code and no longer regulated in the FinSA. The client advisor register will be completely revised and will be merged with the register for foreign financial service providers. The rule on disclosure of compensation (e.g. retrocessions) will be retained in its current form in the preliminary draft. In this way, there will be no provision made for a ban on retrocessions or restrictions on transparency. The enhanced due diligence requirements in connection with client's tax compliance will be regulated within the scope of the dispatch on the AEOI implementing act. In the case of institutional oversight, a general legislative basis is envisaged for legal risks. The Banking Act will not be repealed. However, the FinIA and the Banking Act will be reconciled.

A separate discussion will be conducted by the Federal Council on the specific design of the supervision of asset managers, training and continuing education and the problem of costs associated with enforcement.