Federal Law - Stock Exchanges/Trading In Securities - 3. Security Dealers

3: Security Dealers

Art. 10 License

1 Whoever wishes to be active as a security dealer, requires a license from the Supervisory Authority.

2 The license will be granted if:

a. the applicant guarantees, through its internal rules and its operational organisation, the fulfilment of the duties arising under this law ;

b. the applicant possesses the minimum required capital or has deposited the required collateral ;

c. the applicant and its responsible employees demonstrate the necessary specialised knowledge; and

d. the applicant, its responsible employees as well as its qualified shareholders guarantee the orderly conduct of business operations.

3 The Federal Council shall lay down the minimum requirements for the granting of a license. It shall fix in particular the level of minimum capital for bodies corporate and the amount of collateral to be deposited by natural persons and partnerships.

4 It shall lay down the requirements for the granting of a license in respect of security dealers who wish to be active in Switzerland but have neither registered office nor a branch here.

5 Should the security dealer be part of a group active in the field of finance, the Supervisory Authority may demand an appropriate consolidated supervision by foreign supervisory authorities as well as their consent to the business activity.

6 Should the conditions for the granting of a license change subsequently, the approval of the Supervisory Authority is to be obtained for the continuation of business activities.

7 The expression "security dealer" may only be used in the business name, in the description of its business purpose or in business advertisements by natural persons or bodies corporate and partnerships who have received the consent of the Supervisory Authority to operate as a security dealer.

Art. 11 Rules of conduct

1 The security dealer has towards his customer

a. a duty of information; he points out in particular the risks connected with a certain type of transaction;

b. a duty of care; he ensures in particular that the orders of his customer are executed as best as possible and in a manner that the latter may verify the handling of his transactions;

c. a duty of loyalty; he ensures in particular that any conflicts of interest do not adversely impact his customer.

2 In satisfying these obligations, the business experience and the specialised knowledge of the customer are to be taken into consideration.

Art. 12 Equity

1 The security dealer must possess adequate equity.

2 The Federal Council shall fix the minimum equity requirements and in doing so, shall take into consideration the risks connected with the activity of the security dealers, including off-balance-sheet transactions. It shall determine the degree to which banks must possess these minimum equity requirements.

Art. 13 Risk diversification

1 The security dealer must diversify its risks in an appropriate manner.

2 The Federal Council shall fix the upper limits and the additional equity necessary to cover these risks and determines the extent to which they are applicable to banks.

Art. 14 Consolidation

The security dealer must fulfil the prescriptions regarding equity and risk diversification on a consolidated basis, whenever it forms an economic unit with one or more companies active in the financial field or when it is to be assumed in the circumstances that it is legally obliged or de facto forced to support such a company.

Art. 15 Duties to maintain journals; obligations to notify

1 The security dealer shall record in a journal all orders received and all transactions made by it with all details which are necessary for subsequent verification and supervision of its activity.

2 It must make all notifications necessary for the transparency of the security trading.

3 The Supervisory Authority shall lay down which information is to be notified to whom and in which form.

4 The Federal Council can also subject to the duty to notify pursuant to par. 2, persons and companies who purchase and sell securities on a professional basis but without the intermediary of a security dealer, whenever this is necessary to achieve the object of the law. Companies must appoint a recognised auditing company in order to verify compliance with this notification requirement and are duty-bound to release information to the Supervisory Authority.

Art. 16 Accounting

1 The security dealer shall prepare annual financial statements and shall publish or make them available to the public.

2 The financial statements are to be prepared in accordance with the provisions of Company Law in so far as the Federal Council does not provide for departures therefrom.

3 The Federal Council may provide for more detailed classification rules, supplementary data to be disclosed in the appendix, the preparation and publishing of interim financial results and balance sheets and a duty to prepare consolidated financial statements.

4 The provisions of the Federal Law on Banks and Savings Banks shall apply to banks.

Art. 17 Audit

1 The security dealer is obligated to subject its activities to audit once a year by a recognised firm of auditors who also shall perform unannounced interim audits.

2 It must grant the auditors access to all documents and give all information which they need to fulfil their auditing duties.

3 The security dealer shall bear the costs of the audit.

Art. 18 Auditors

1 Recognised bank auditing firms as well as auditing companies which are recognised by the Supervisory Authority as auditors for security dealers may be entrusted with the audit. The Ordinance shall set out the conditions for recognition.

2 Recognised auditing firms themselves may not be security dealers.

3 The auditing firm must be independent of the Management and Board of Directors of the security dealer to be audited.

Art. 19 Duties of the auditors

1 The auditors shall verify whether the security dealer has fulfilled its legal duties and has complied with the conditions for the granting of a license as well as the internal rules.

2 They shall prepare a report setting out their audit findings and submit it to the security dealer subject to audit and to the Supervisory Authority.

3 The Supervisory Authority shall issue provisions regarding the matters to be covered by the audit and the contents of the audit report.

4 Should, during the annual audit or interim audit, the auditors uncover violations of the law or other irregularities, they shall set an appropriate deadline for the security dealer to re-establish an orderly state of affairs and make a corresponding comment thereon in the audit report.

5 They shall inform the Supervisory Authority at once whenever

a. the deadline in par. 4 is not respected,

b. the setting of a deadline appears to be without purpose, or

c. punishable acts or grave irregularities are uncovered.

6 The auditors shall maintain secrecy on all matters discovered by them during the audit other than vis-a-vis the Supervisory Authority.

KPMG Fides Unofficial Translation of Swiss Federal Stock Exchange Law
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