FINMA authorises first supervisory organisations with effect as of 20 July 2020

Dr. Jean-Claude Spillmann Director, Head Asset & Wealth Management and Banking Regulatory, Legal, PwC Switzerland 10 Jul 2020

FINMA has authorised two supervisory organisations responsible for the future supervision of portfolio managers and trustees. The application of three further candidates is still under review. The authorisations have an impact on portfolio managers as they mark the kick-off for the first application procedures and trigger in particular one transition period set out in the Federal Act on Financial Institutions (FinIA).

The authorisation of two supervisory organisations by FINMA as of 20 July 2020 will make it possible for portfolio managers to fulfil the requirement of affiliating to one of those organisations. It also triggers the transition period set out in article 74, para. 3 of FinIA. According to this provision, portfolio managers that assume their activity within the period of 1 January and 31 December 2020 must – within one year of the first supervisory organisation being authorised (therefore by 19 July 2021) – affiliate with a supervisory organisation and submit an application for authorisation to FINMA. Portfolio managers having commenced their business prior to 31 December 2020 enjoy a longer transition period until 31 December 2022.

Prudential supervision of portfolio managers by supervisory organisations

FinIA has an impact on the regulatory circumstances of portfolio managers. The new authorisation requirement set out in FinIA will create a level playing field for portfolio managers, while leaving considerable flexibility in certain areas based on the portfolio manager’s size, risk structure and field of activity. In all cases, portfolio managers will have to document their business activities, be organised in accordance with certain requirements as set out in FinIA (i.e. form of organisation, one- or two-tiered organisation and place of management) and have installed a risk management and internal control mechanism. The new FinIA regime will also include the supervision of portfolio managers. Supervision will be performed by the new supervisory organisations. FINMA will not be involved in day-to-day supervision but will only intervene in selected cases. 

Code of conduct and additional obligations under FinSA 

As an obligation under FinSA, portfolio managers will have to ensure compliance with FinSA for the offering of financial services. This entails code-of-conduct duties, such as client segmentation, information and documentation duties towards their clients, appropriateness and suitability assessments or best practice for how client orders are treated. In addition, there are organisational obligations to which portfolio managers will have to adhere. These will have to be implemented to avoid conflicts of interest, to protect client interests and other elements as set out in the code of conduct.

In summary

In essence, the new laws may require portfolio managers to make adjustments to their internal organisation or to reorganise their business model in accordance with FinIA, but they also allow for increased client protection (rules set out in FinSA), which in turn protects the Swiss market place. With the authorisation of supervisory organisations, a further important step towards the future landscape of financial regulation in Switzerland has been taken.

Have a look at our brochure outlining the different requirements for portfolio managers under FinSA and FinIA.

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Dr. Jean-Claude Spillmann

Dr. Jean-Claude Spillmann

Director, Head Asset & Wealth Management and Banking Regulatory, Legal, PwC Switzerland

Tel: +41 58 792 43 94

Barbara Gallati

Barbara Gallati

TLS Manager, PwC Switzerland

Tel: +41 58 792 40 22

Leandro Lepori

Leandro Lepori

Manager, Legal, PwC Switzerland

Tel: +41 58 792 98 45