The regulation of the investment business is shaped globally by the desire to protect investors and strengthen the financial system. This became noticeably more pronounced after the financial crisis in 2008. In some cases, investor protection is interpreted extensively, so that in some places there is talk of paternalism on the part of investors, or at least of a strong reduction in personal responsibility.
After the European regulation with MiFID I/II (Markets in Financial Instruments Directive) had already expanded and put into effect the regulatory framework for years, new provisions will now also come into force in Switzerland at the beginning of this year.
Federal regulation is based on the applicable European provisions. Although some provisions still need to be finalised, it can be stated that the new regulation will have far-reaching consequences for financial service providers.
FIDLEG (Financial Services Act) and FINIG (Financial Institutions Act) were enacted by the Federal Council on 6 November 2019 together with the implementing ordinances as of 1 January 2020. Transitional periods of two years are provided for in principle.
The FIDLEG contains specifications on the provision of financial services and the offering of securities and other financial instruments. It also makes it easier for clients to enforce their legal claims. The FINIG also introduces a supervisory regime with coordinated content for the various categories of financial institutions (asset managers, collective asset managers, fund management companies and investment firms). From the point of view of the Swiss Fund & Asset Management Association (SFAMA), FIDLEG and FINIG make a significant contribution to the exportability of the Swiss financial centre's products and services. The legislative package increases legal certainty and creates a level playing field for providers of comparable investment products and financial services and also modernises investor protection, at least this is the intention of the legislator. In future, conduct at the point of sale will be regulated in the FIDLEG for all financial instruments. The rules apply regardless of whether the financial service provider in the specific case is a bank, an independent asset manager or another financial intermediary.
Banks, with their broad-based structures, will generally be able to comply with these provisions without further problems. Independent asset managers will find it more difficult to implement the new provisions. With the introduction of FIDLEG and FINIG, they will now be subject to a licence requirement and the conduct requirements will also be tightened. According to estimates, there are 2,000 independent asset managers in Switzerland, who together manage assets totalling around CHF 600 billion. They thus form an important pillar of the Swiss financial centre.
The independent asset managers are now newly regulated by the state and will in future be licensed by the Financial Market Supervisory Authority (FINMA) and supervised by a supervisory organisation (AO) supervised by FINMA. The industry associations of independent asset managers welcome the 'regulation suitable for the profession' and point out that the Federal Council is thus committing itself to a diversified Swiss financial centre and that the independent asset management industry will be strengthened. The Federal Council had observed the requirements of parliament in the concrete implementation of the governance and organisation requirements for asset managers and had kept them compatible even for small companies. Massive threshold values define the requirements with regard to compliance and risk management. For larger and large independent asset managers, there is now an obligation to appoint a board of directors with a majority of non-operational members and to appoint an independent internal auditor to monitor the company's risks in collaboration with the external auditors.
On the time axis, the changes in organisational and personnel structures, such as the appointment of independent, non-operational directors, are often underestimated and even seemingly long transitional periods pass more quickly than one would like. For this reason, it is advisable not to put off looking for suitable members of the Board of Directors for too long. This is all the more so as it may also create opportunities to further develop the existing business model and to give the important strategy body broader support, which may have a positive impact in particular on any impending succession solutions. In addition, successfully overcoming new regulatory hurdles also provides a certain degree of protection for the business model. Positive points that provide the impetus to tackle it. (Sources: NZZ, investrends.ch, VSV, VQF, FINMA)
About the Author
DECALIA ASSET MANAGEMENT SA
Bernhard Utiger has 20 years of experience in the distribution of financial products and has worked in this capacity for Julius Baer, J.P. Morgan Asset Management, Flossbach von Storch, Vontobel Investment Banking. He is passionate about placing investment solutions in such a way that win-win situations are created that benefit the client. He learned banking from scratch at a regional bank and Credit Suisse. He worked on regulatory issues and risk management in the Corporate Audit department of Credit Suisse and at PwC. He is a banking expert. Today he is Head German Speaking Switzerland at DECALDIA Asset Management.