On 1 January 2020, the Federal Act on Financial Services of 15 June 2018 (FinSA) and the Federal Act on Financial Institutions of 15 June 2018 (FinIA) entered into force, subject to a phasing-in period of up to two years. The new regulations rely to a significant extent on private organisations taking over (public) supervisory functions and handling the alternative dispute resolution schemes for client disputes. Six months into the FinSA and FinIA becoming effective, this institutional framework is now essentially in place, and several transitional periods within which market participants have to take action or comply with the regulations have been put in motion.
Specifically, with effect from 6 July 2020, the Swiss Financial Market Supervisory Authority (FINMA) authorised the first two supervisory organisations which will be responsible for the supervision of portfolio managers and trustees under the FinIA. It also admitted, with effect from 20 July 2020, the first registration body for client advisers pursuant to the FinSA. Finally, the Federal Department of Finance recognised, with effect from 24 June 2020, a number of ombudsman's offices for financial services providers under the FinSA.
FINMA authorises first two supervisory organisations
Under the FinIA, portfolio managers and trustees (as well as certain precious metals trade assayers) require a licence by FINMA and are subject to its supervisory oversight and enforcement powers. However, the ongoing prudential supervision will be exercised by private supervisory organisations authorised by FINMA to perform this regulatory function.
Effective 6 July 2020, FINMA authorised the first two of these supervisory organisations: (a) the Organisme de Surveillance des Instituts Financiers (OSIF) based in Geneva, which was established by the existing anti-money laundering (AML) selfregulatory organisation Association Romande des Intermédiaires Financiers ARIF, and (b) the Organisation de Surveillance Financière (OSFIN) based in Neuchâtel, with offices in Zurich and Lugano, established under a collaboration between the two existing AML self-regulatory organisations Polyreg Allg. Selbstregulierungs-Verein and Organismo di Autodisciplina dei Fiduciari del Cantone Ticino. Three further applications for an authorisation as supervisory organisation are still pending with FINMA.
The authorisation of the supervisory organisations by FINMA triggers the deadline for portfolio managers and trustees to join a supervisory organisation.
New financial intermediaries who intend to commence a regulated activity as a portfolio manager or trustee within one year from the coming into force of the FinIA (i.e. by the end of the year 2020) will continue to be able under the transitional regime to take up their activity as soon as they have joined a recognised AML self-regulatory organisation for AML purposes. However, they now have a deadline of 6 July 2021 (i.e. within one year from the first supervisory organisations having been authorised): (i) to be admitted as a member of one of the supervisory organisations, and (ii) to file a licence application with FINMA.
Existing portfolio managers and trustees that did not require an authorisation from FINMA under the previous regulations (but only a membership with a self-regulatory authority for AML purposes), and are newly subject to a licence requirement according to the FinIA, are not specifically affected by the timing of the authorisation of the first supervisory organisations. They had to report to FINMA by 30 June 2020 that they intend to apply for a licence. Having done so, they are now only required to satisfy the requirements of the FinIA, join a supervisory organisation and submit a licence application with FINMA by the end of 2022 (i.e. within three years from the FinIA entering into force). They may continue to conduct their business activities during such time if they are subject to supervision by a recognised AML self-regulatory organisation (specific transitional rules apply to portfolio managers and trustees that were previously directly supervised by FINMA for AML purposes).
Up until the end of the notification period on 30 June 2020 (see above), FINMA had received notifications from 1,934 existing portfolio managers and 272 existing trustees that intend to apply for a licence. We therefore expect that FINMA will face an intense workload to process all applications.
Portfolio managers and trustees commencing their activities from 1 January 2021 onwards will need to have a FINMA licence and be affiliated with a supervisory organisation before they can start their regulated business. In light of the impending workload for FINMA and the supervisory organisations, it is advisable to initiate the application process well in advance.
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