On 24 October 2018, the Swiss Federal Council began the consultation for the 3 implementing ordinances to the Financial Services Act and the Financial Institutions Act. The consultation period will last until 6 February 2019; the ordinances and the two laws will enter into force on 1 January 2020.
Following the adoption of the FinSA (FIDLEG) and the FinIA (FINIG) by the Swiss Parliament on 15 June 2018, the Swiss Federal Council has now published the following three consultation drafts for the implementing ordinances to these two acts for consultation:
Additionally to these three ordinances, it is expected that FINMA, in its capacity as supervisory authority, will also publish implementing ordinances to the FinSA and the FinIA, which will contain more technical aspects concerning the implementation of FINMA’s supervisory functions.
Furthermore, FinSA and FinIA will also have a substantial impact on the Collective Investment Schemes regulations (CISA / KAG, CISO / KKV, CISO-FINMA / KKV-FINMA).
The FinSO sets out a range of new requirements relating to the provision of financial services and the organization of financial service providers. Based on an initial review of the draft ordinance, especially the following new features of the consultation draft seem noteworthy:
In general, information has to be provided in a way that clients have enough time to consider this information before entering into a contract.
For remotely provided advice, Article 9(2) FinSA sees an alleviation regarding the duty to hand out the key information sheet before executing a transaction. Article 15 FinSO further specifies the conditions for this alleviation.
The FinIO specifies the new requirements for licensing, the key duties of the various types of financial intermediaries and the key principles for supervision. Based on our initial review, especially the following provisions seem to be of interest:
The SOO sets forth the requirements for the new supervisory organizations. These will be responsible for the ongoing supervision of portfolio managers, trustees and precious metal trade assayers. FINMA is responsible for the licensing of these supervisory organizations. These will have to apply a risk-graded supervisory concept based on a risk assessment system provided by FINMA.
It is expected that the consultation on these three ordinances will receive extensive comments from the industry and that the three drafts may be subject to significant amendments. Additionally, the industry will also need to see how and what FINMA will add to the regulatory framework in the form of the FinSO-FINMA and FinIO-FINMA.
Furthermore, we would also like to draw your attention to the major changes and effects this ordinance will have on the regulation of collective investment schemes. In particular, the marketing and distribution activities in the existing investment fund regulation will be significantly affected.
We recommend that in particular Swiss banks, asset managers and fund management companies start assessing the impact of the regulations on their business models (if this has not been done already). It is key to identify the need for action in order to make a concrete implementation plan. The new provisions have to be complied with from 1 January 2020 onwards. However, the FinSO consultation draft includes several transitional provisions. For instance, the FinSO requirements with regard to client segmentation, the code of conduct and organization have to be complied with only one year after the FinSO has entered into force.
Performing a regulatory impact assessment is a good way to address all of these topics. This is also relevant for banks that have already implemented MiFID II principles in their Swiss organization.
We will publish further information regarding this topic in the upcoming weeks.