Enhancing Transparency and Protecting Investors: New Regulations for Swiss Banks and Investment Firms
Accurate Client Information Required
In an effort to increase transparency and safeguard investors, banks and investment firms in Switzerland are now mandated to obtain accurate information from clients before providing investment advisory services or portfolio management. This requirement is stipulated under Article 8d of the Banking Act.
According to this regulation, if a client fails to provide necessary details about their financial circumstances, investment goals, and knowledge and experience in investing, the bank or investment firm cannot recommend suitable investment services or financial instruments. The aim is to ensure that investors receive personalized advice tailored to their specific needs.
Evaluating Investment Products
In addition, banks and investment firms must assess the appropriateness of investment products for clients, taking into account their knowledge and experience in investing. If a client fails to provide sufficient information or if the bank determines that a product is not suitable for the client, it must warn the client accordingly.
Best Execution of Client Orders
Banks and investment firms are also required to arrange for the best execution of client orders in the interest of the client. This means taking all reasonable steps to obtain the best possible result for the client when executing trades, considering factors such as:
- Price
- Quantity
- Quality
- Time
Recording and Reporting of Transactions
To ensure market integrity, banks and investment firms are required to record all transactions, including those made on and off regulated markets. They must also keep this information available for at least five years, allowing the Financial Market Authority (FMA) to reconstruct individual transactions.
Reporting Duties
Banks and investment firms are also required to report their services provided to clients in a suitable form. This is aimed at enhancing transparency and enabling clients to make informed decisions about their investments.
Dealing with Conflicts of Interest
To prevent conflicts of interest, banks and investment firms must define internal procedures for identifying and dealing with such situations. They may only accept fees, commissions, and non-monetary inducements offered in connection with the provision of investment services and ancillary services if these are in accordance with conditions set out by ordinance.
Transactions with Governing Bodies
Finally, banks are prohibited from engaging in transactions that could compromise their independence or reputation. Transactions with members of the governing body, independent auditors, controlling shareholders, and persons close to these categories must conform to generally accepted principles of the banking business.
Conclusion
The new regulations aim to enhance transparency, protect investors, and promote a stable and efficient financial system in Switzerland. By implementing these measures, Swiss banks and investment firms can ensure that they are providing high-quality services while maintaining their integrity and reputation.