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The Swiss Council of States Publishes Observations on the FIDLEG and FINIG Bills

 

On March 13, the Swiss Council of States has published its overview of the Financial Services Act Bill (FIDLEG) and Financial Institutions Act bill (FINIG).

The FIDLEG introduces a series of new and more stringent requirements for financial services providers in Switzerland. All financial services providers will have to abide by a series of rules of conduct, aimed at introducing new standards of protection for customers in Switzerland.

Another notable requirement is that foreign financial services providers shall abide by the so-called “third country rules”: in other words, they will have to guarantee the same level of protection granted by Swiss financial services providers. Foreign providers will also have to obtain a license by the FINMA, the Swiss Financial Market Authority, before entering the Swiss market. The FIDLEG also introduces new rules to facilitate customers’ access to justice and additional prospectus requirements for public offering of securities in Switzerland.

The FINIG introduces a differentiated supervisory regime for portfolio managers, managers of collective assets, fund management companies and securities firms: they will have to be supervised by the FINMA or other supervisory authorities.

The consultation period on the FIDLEG and the FINIG bills was opened in 2014 but their adoption has been postponed.

The remarks of the Council of States can be summed up as follows:

  • Professional investors must be defined in section 4 paragraph 3 of the FIDLEG bill – the Council of States deleted paragraph 5 within the same section. This means that the Federal Council will not have the discretion to broaden the definition of professional investors.
  • The Council of States deleted section 6, paragraph 2 of the FIDLEG. Financial services providers should not have the duty to establish industry-specific standards for the education of client advisors. As a consequence, it’s up to each single financial services provider to establish the adequate level of education for its own advisors.
  • Regarding section 8, the Council of States, adhering to the text proposed by the Federal Council, agrees that the duty of diligence should not be automatically satisfied by complying with the FIDLEG: so even if a financial services  provider satisfies the duties of diligence established in the FIDLEG, it could be in breach of the duties of diligence established in the contract with the client.
  • By amending section 9, paragraph 2ter and section 10 paragraph 2 of the FIDLEG, the Council of States suggests that a financial services provider has the duty to provide the final investor with a basic information sheet in any case, even if he or she is not asked for this information.
  • Finally, and in accordance with the Federal Council, the Council of States agrees with the section 70 paragraph 3 of the FINIG: investment managers do not have to be subject to a licensing requirements provided by the FINIG if they have carried out their business for at least 15 years, do not take on board any new clients and do not manage collective investment vehicles.

It has to be said that these remarks are minor and that the Council of States substantially agrees with the draft bill proposed by the Federal Council: it can be expected that a final version of the FIDLEG and the FINIG will be finally approved during the summer session of the Parliament, between May and June 2018.