Interview: An update on the Federal Act on Financial Services in Switzerland
1st December 2020
Interview: An update on the Federal Act on Financial Services in Switzerland with Jérôme Neri.
Jérôme, what are the main objectives behind the introduction of the Federal Act on Financial Services (“FinSA”), and who will be most impacted?
The Federal Act on Financial Services (“FinSA”) entered into force on January 1st, 2020. The intent behind its introduction is to harmonize the competitive conditions in place for financial institutions and assets (in effect levelling the playing field). Also, these new regulations have been introduced in order to greater-protect clients and investors alike, along with creating an alignment with existing EU regulations (principally MiFID II).
The FinSA regulations directly apply to any provider of financial services which includes Swiss fund managers, foreign fund managers, and marketers who provide services such as fund distribution or engage in any marketing towards potential investors in Switzerland.
What are the fundamental differences between the existing Swiss financial market regulations, namely the Collective Investment Schemes Act (“CISA”), its implementing ordinance (“CISO”) and the FinSA (FinSO being its implementing ordinance)?
Broadly speaking, the FinSA has a larger scope than the CISA since it covers several financial services and instruments (and not only funds). With the entry into force of the FinSA, the CISA has become the product-specific legislation governing funds. The FinSA has also revised the CISA on various aspects. In terms of definitions for instance, the adoption of the FinSA has resulted in the removal of the reference to the practice of fund “distribution” from Swiss financial regulations. This term, which was globally understood by the asset management industry, has been replaced by a concept known as “offering”. Fund managers and marketers offering their funds in Switzerland must respect a series of new obligations defined by the FinSA:
- Completion of detailed client segmentation
- Adherence to the FinSA Code of Conduct
- Respecting the FinSA Organizational Measures
- Affiliation with a Swiss Financial Ombudsman (if applicable)
- Completion of entry into a Client Advisor Register (if applicable)
These new regulatory concepts, coupled with the new obligations, may indeed seem complex to non-Swiss based financial institutions and present potential delays entering the market here. However, the FinSA has also lowered the regulatory burdens on foreign fund managers targeting only Institutional and/or Professional investors as they will no longer be required to appoint a Swiss Representative & Paying Agent; except if they wish to also market their funds to High-Net-Worth-Individuals (HNWIs) and small family offices. Indeed, under the FinSA HNWIs must now explicitly express their wish to be considered as Professional Investors before being contacted by alternative fund managers and marketers (hedge fund and private equity fund managers typically).
In this new regulatory environment, we firmly believe that ACOLIN is well-positioned to act as a local partner to existing and new clients, to help them keep or gain rapid access to Swiss investors while being compliant with Swiss regulations.
Is there a transitional phase in place to allow foreign fund managers time to adapt to the new regulations?
Yes, in spite of the FinSA entering into force on January 1st 2020, a two-year transitional phase was announced to give foreign fund managers & marketers time to become compliant with the new regulations (FinSA new client segmentation, Code of Conduct, Organizational Measures). The transitional phase will end on December 31st, 2021.
Please also note that until foreign fund managers & marketers can prove they are compliant with the FinSA, a Swiss Representative and Paying Agent must be maintained to market foreign funds to non-regulated Qualified Investors (typically pension funds, family offices, and HNWIs).
ACOLIN advises its clients to undertake all necessary internal reviews in a timely manner, and as ever remains at hand to assist with any enquiries, or offer guidance on the FinSA when needed.
What solutions does ACOLIN offer that address these issues?
Through its Swiss Distribution Compliance Solution, ACOLIN is confident it can help new & existing clients both navigate and meet the evolving financial market regulations in Switzerland. This service offers a tailored & comprehensive solution to fund managers and marketers targeting Qualified Investors (Professional & Institutional) in Switzerland, addressing each of the FinSA obligations directly in a step-by-step manner.
Clients will have the opportunity to conduct an initial needs assessment, after which the ACOLIN team will outline the steps required to achieve compliance with the FinSA. Pro-active assistance will be offered towards meeting each of the FinSA obligations that apply to them. Initial & ongoing due diligence on all relevant documentation will be performed, and conducted with focus and professionalism.
Overall, we aim to provide first-class service & support, utilizing the team’s significant expertise and experience, along with leveraging ACOLIN’s longstanding reputation as a leader in the Swiss fund services domain.