Swiss Financial Market Law

The Markets in Financial Instruments Directive (MiFID) and its delegating legal acts, which are in force since 2007, were subject to a fundamental revision. The MiFID II, the successor of the MiFID, together with a directly applicable regulation (MiFIR), entered into force in the EU in January 2018. The MiFID II/MiFIR in particular contain conduct and organizational provisions for the distribution of financial instruments and provisions on trading.

In Switzerland the Federal Council published the dispatch regarding the new Financial Services Act (FinSA) and the Financial Institutions Act (FinIA) in November 2015. Parliament adopted both laws on 15 June 2018. The FinSA, following MiFID/MiFID II, governs the prerequisites and especially the rules of conduct for providing financial services and offering financial instruments (i.a. prospect duties, readily understandable basic information sheet). The FinIA essentially harmonizes the authorisation requirements for financial institutions.

What are the challenges involved?

• The new provisions suggested by MiFID II and FinIA will have an impact on the whole value chain and require a multitude of fundamental strategic decisions
• Market access to the EEA
• Reshaping of the distribution model (client classification, suitability)
• Firm wide convergence of processes and compliance standards, to reduce compliance costs and use synergies

FMIA introduces uniform rules governing the organization and operation of the financial market infrastructure, which includes the following institutions: stock exchange, multilateral trading systems, central counterparties, central custodians, transaction registers and payment systems. Additionally, the FMIA imposes new requirements for organized trading systems.

With the enactment of the FMIA on 1 January 2016, Switzerland adapted its financial regulations to changed market conditions and international standards.

What are the challenges involved?

• Impacts of the regulations on financial institutions
• Clearing obligations
• Counterparty classification
• Reportable data
• Adjustments of existing derivatives contracts

The pressure on combating money laundering and terrorist financing in the financial sector has once more increased considerably in the last few years. As a consequence of the examination that took place in spring 2016 as to whether the provisions of the Groupe d'action financière (FAFI) / Financial Action Task Force on Money Laundering (FATF), revised in 2012, have been properly implemented in Swiss law, Switzerland is currently undergoing an in-depth follow-up review process, which requires further legal and regulatory adjustments.

The revised Agreement on the Swiss banks’ code of conduct with regard to the exercise of due diligence (CDB) is planned to be published in July 2018, its entry into force on 1 January 2020. In parallel, FINMA is revising the Anti-Money Laundering Ordinance-FINMA (AMLO-FINMA), which will also enter into force on 1 January 2020. These amendments have a direct impact on the compliance with the KYC and due diligence obligations of financial intermediaries as well as on how they will structure underlying processes.

What are the challenges involved?

• Safety measures for a successful combating of money laundering and terrorist financing have to be observed by financial intermediaries.
• An independent and well-functioning money laundering organization is needed in order to successfully prevent money laundering and avoid reputational risks
• In order to evaluate the impacts on existing processes and control mechanisms, an impact analysis is necessary
• Adjustment of account opening processes and extension of the due diligence requirements.

On the one hand, the AIFMD addresses the obligation to hold a license and to be supervised, applicable to all EU-domiciled investment fund managers who are not already subject to the UCITS. On the other hand, it regulates access to the EU market for fund managers coming from non-EU member states, such as Switzerland, and defines the conditions under which asset management may be delegated.

What are the challenges involved?

Until 2015, Swiss asset managers of collective investment schemes had only access by observing the relevant national laws on private placement. Under certain circumstances, Swiss asset managers may also benefit from the new passport regime from 2015 onwards. In 2018, the EU Commission will then replace these national laws with the EU passport regime. Thus, following challenges are involved:

• Strategic implications of the AIFMD on product strategies and business models
• Requirements for Swiss asset managers regarding the management of EU-domiciled collective investment schemes
• Activities how can Swiss asset managers be active under the national laws on private placement?
• Should Swiss asset managers incorporate a branch office in the EU?