Federal Council adopts dispatch on Financial Services Act and Financial Institutions Act

Bern, 04.11.2015 - Today, the Federal Council adopted the dispatch on the Financial Services Act (FinSA) and on the Financial Institutions Act (FinIA). The FinSA governs the prerequisites for providing financial services and offering financial instruments. The FinIA makes provision for an activity-based, differentiated supervisory regime for financial institutions requiring authorisation.

Aside from creating uniform competitive conditions and strengthening the competitiveness of the financial centre, the FinSA serves primarily to improve client protection. It contains rules on providing financial services and offering financial instruments for all financial service providers operating in the financial centre on a commercial basis. The proposed regulation takes account of the various features of financial service providers and financial instruments, as well as the different needs of the various client segments. The improvement in client protection is achieved namely by means of comprehensive transparency provisions, while refraining from imposing bans.

Both the FinSA and the FinIA build on the existing supervisory provisions. Well-established provisions have been taken over and combined with new elements in the following areas:



Financial Services Act

The FinSA makes provision for a basic training and continuing professional development duty for client advisers. In this regard, the sector is responsible for setting the minimum requirements within the framework of self-regulation provisions. The extent of the financial service provider's clarification duties is based on the type of service and is modular in structure. Financial service providers do not have to perform any review in the case of execution only transactions or transactions at the client's request that are not within the framework of an advisory service. An assessment of appropriateness has to be performed when advising clients on individual transactions (transaction-related investment advice), and an assessment of suitability is required when providing investment advice taking account of the entire client portfolio (portfolio-related investment advice and portfolio management). Moreover, client segmentation is structured as a dynamic system which, under certain conditions, gives the client the option of switching between segments (opting system). Two main segments of clients are defined, i.e. retail clients and professional clients, and the latter has a subgroup for institutional clients. The conduct and product provisions are attuned to the protection needs of the respective client segment.

A duty to inform exists under supervisory law for all remuneration (e.g. retrocessions, brokerage fees, etc.) received from third parties. Uniform rules are also provided for with regard to prospectus requirements – with extensive simplifications for SMEs – as well as with the introduction of a key information document. In order to be able to ensure that client advisers of financial service providers not subject to supervision in Switzerland also fulfil the prerequisites required under the FinSA for commercial financial market activity in Switzerland, they must be entered in a register of advisers.

Provision will not be made for the following instruments, which were highly controversial during the consultation: reversal of the burden of proof, the procedural costs fund and an arbitration court; a more moderate cost settlement rule will be established instead of the last two. The regime for collective legal enforcement (group settlement proceedings and representative action) is not to be limited to financial service providers, which is why it is being examined as part of the implementation of motion 13.3931 (Birrer-Heimo) transmitted by Parliament. In contrast, the ombudsman system will be strengthened. In addition, all financial service providers must now affiliate to an existing or newly created ombudsman.

Financial Institutions Act

A differentiated supervisory regime for financial institutions (portfolio managers, managers of collective assets, fund management companies and securities firms) will be introduced with the FinIA. The main change concerns the prudential supervision of managers of individual client assets, managers of the assets of occupational benefits schemes and trustees. Not all financial institutions will be supervised by FINMA in the process. The prudential supervision of managers of individual client assets and trustees will be performed by a supervisory organisation that is independent in its supervisory activity, whereby several supervisory organisations are possible. In the area of portfolio management, both supervisory authorities will be given the power to make provision for an audit frequency of several years depending on the risk and the activity of those supervised by them. Finally, the FinIA will introduce the authorisation chain system. As a rule, the more complete form of authorisation will now also include the authorisation forms that are envisaged for less extensive activities.