<iframe src="//www.googletagmanager.com/ns.html?id=GTM-MX3DVL" height="0" width="0" style="display:none;visibility:hidden"></iframe>Cross-Border Business - Impact of the New Financial Market Regulation | Pestalozzi Attorneys at Law

Cross-Border Business - Impact of the New Financial Market Regulation

24.01.2017

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  • Cross-border inbound and outbound business
  • Regulation for cross-border offering of financial products
  • Authorization and notification requirements

1. Current Regulatory Regime

Prior to the introduction of the new Swiss financial regulatory regime, Swiss law was quite liberal in respect of regulating and supervising cross-border business activities in Switzerland. As such no license was required, which will change eventually. In the financial industry, cross-border financial services means the offering and performance of financial services on Swiss soil by entities or persons domiciled outside of Switzerland, with or without a physical presence in Switzerland (inbound financial services) and activities conducted by Swiss regulated financial institutions outside of Switzerland (outbound financial services).

2. Overview of the New Financial Market Regulation

The Financial Market Infrastructure Act (FinfraG), the Financial Services Act (FIDLEG) the Financial Institutions Act (FINIG) contain a number of crossborder provisions that are relevant for financial intermediaries, such as banks, securities dealers (securities houses), asset managers, insurance companies and financial market infrastructures. Certain provisions are adopted from existing laws such as the Banking Act (BA) and the Stock Exchange Act (SESTA); others are new. Whereas FinfraG has already been enacted, FIDLEG and FINIG are still in draft form.

Certain cross-border activities continue to be governed in other capital market acts. For example, the distribution of collective investment schemes on a cross-border basis in or from Switzerland will continue to be regulated (at least to a certain extent) in the Act on Collective Investment Schemes (CISA) and its implementing ordinance (CISO).

FinfraG includes provisions related to both crossborder inbound and outbound financial services provided by so called financial market infrastructures. Financial market infrastructures, according to FinfraG are: (i) trading venues and organized trading facilities, (ii) central counterparties, (iii) central securities depositories, (iv) trade repositories and (v) payment systems. Key cross-border rules include the following:

  • Swiss financial market infrastructures that intend to set up, acquire, or abandon a physical presence abroad (branch, representation office, or subsidiary) must notify the Swiss Financial Market Supervisory Authority (FINMA) in advance.
  • FINMA must recognize any foreign trading venue, central counterparty and trade repository prior to becoming active on Swiss soil. Only upon FINMA’s recognition, they are allowed to provide financial services to Swiss participants.
  • Foreign trading participants with or without a Swiss branch are required to obtain a (remote-member) license from FINMA.

FinfraG also contains provisions on the reciprocal exchange of information as well as rules and obligations related to market conduct, which are relevant when Swiss financial market infrastructures execute crossborder transactions.

FIDLEG contains provisions related to cross-border inbound financial services of non-Swiss (i) financial services providers, (ii) client advisers and (iii) issuers or distributors (Anbieter) of securities and financial instruments. The following rules must be observed:

  • Non-Swiss financial services providers (unless they already hold a FINMA authorization) and nonSwiss client advisors intending to provide financial services in Switzerland must be registered in the so called register for foreign financial services providers or client advisor register, respectively. Despite registration, they are, however, not subject to the supervision of FINMA. Registration ensures the satisfaction of statutory requirements.

FIDLEG also regulates the requirements for the admissibility of foreign prospectuses in Switzerland and for the distribution of structured products by foreign financial institutions in Switzerland.

FINIG includes provisions related to both cross-border inbound and outbound financial services provided by financial institutions. Financial institutions according to FINIG are: (i) asset managers, (ii) qualified asset managers, (iii) fund management companies, (iv) securities houses and (v) banks. Market participants must comply with the following regulations:

Regulated Swiss financial institutions that intend to set up, acquire, or abandon a physical presence abroad (branch, representation office or subsidiary) must notify FINMA in advance.

FINIG sets forth that FINMA, on supplementary requirements, can classify the permission to establish foreign controlled securities houses and banks in Switzerland as conditional.

When foreign asset managers, qualified asset managers, securities houses and banks employ persons to permanently render financial services in Switzerland or from Switzerland, the foreign financial institutions are required to obtain an authorization from FINMA.

3. Key Points for Market Participants

Non-Swiss financial intermediaries with Swiss derivative counterparties have already had exposure to FinfraG. They should, however, start considering whether FIDLEG and/or FINIG will apply also to them when providing cross-border financial services and executing transactions, in order to comply with the new Swiss regulatory framework.

For further information please contact:

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