Parliament adopted FinSA and FinIA in mid-June to create a level competitive playing field for financial intermediaries and to improve customer protection. PwC Legal Switzerland has published a brochure on the new financial market regulation that offers an overview of the most important topics and how they affect financial service providers.
Following an extended consultation period, the Financial Services Act (FinSA) and the Financial Institutions Act (FinIA) were approved by parliament on 15 June 2018 and are set to come into force on 1 January 2020.
In addition to improved customer protection, the main purpose of the new laws is to align Swiss and EU regulations. Furthermore, FinSA and FinIA set out organisational structures to help financial intermediaries implement the principles of the new regulation in their internal processes.
FinSA and FinIA generally share the same goals as the European financial market guideline MiFID II; however, FinSA and FinIA include many areas that are either covered in another EU regulation such as the PRIIP or prospectus regulation, are completely new or complement existing regulations.
Investor protection a priority
FinSA aims to provide more robust and long-term protection for investors by establishing harmonised rules on transparency and avoiding conflicts of interest as well as on compliance with standard practice for due diligence.
Investor protection covers areas such as
- Client classification
- Duty to provide information
- Suitability and appropriateness tests
- Duty to keep records
- Best execution
Governance to avoid conflicts of interest
Requirements for internal governance ensure that companies implement and carry out their statutory duties with respect to investor protection and transparency towards customers in a conscientious and sustainable manner. The regulations cover organisational measures and directives and address conflicts of interest.
One of the most discussed topics in relation to FinSA and MiFID II is conflicts of interest, particularly the issue of compensation for third parties (inducements). Here, the Swiss regulation differs significantly from MiFID II, as customers have the power to prevent such disbursements.
The PwC brochure also explains the following:
- Registration of advisors
- The duty to publish a prospectus
- Key information document
The brochure also lists which topics are covered by MiFID II that are not included in FinSA.
Who may do what?
FinIA sets out the requirements governing the activities of financial institutions. FinIA stipulates the licensing requirements for wealth managers, trustees, asset managers, fund managers and investment firms, whereby the nature of their business is defined by the activities they actually carry out and not their legal structure. This increases the scope of application.
Finally, the detailed, real-life overview of the new regulation describes the penalties for breaches against FinSA and FinIA, the transitional provisions, and provides an insight into the exact implementation requirements that the federal government may issue.
Now that the legal texts have been published, PwC Legal recommends companies to establish their own interpretation so they can take the necessary steps towards implementing the regulation.