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Switzerland Overhauls Financial Market Legislation: Key Changes and Effects
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Switzerland has revamped its financial market legislation architecture. The new framework includes several key acts and ordinances that have entered into force since January 1, 2020, with transition periods of two years for most purposes.
Background on the New Framework
The Financial Services Act (FinSA) and Financial Institutions Act (FinIA) form the backbone of this revised framework. These acts bring investor protection in Switzerland up to date, focusing on investors taking responsibility for themselves. They consolidate existing duties that were previously spread across various legal texts, case law, and circulars, resulting in limited changes for market participants.
Key Changes Under FinSA
- Asset managers and trustees are subject to stricter regulation.
- Conduct rules concerning investment advice are more detailed, with extended information and documentation duties, a compulsory review of appropriateness and suitability, and transparency and due diligence requirements.
- Extended prospectus requirements apply to the offering of financial instruments, including the production and supply of key information documents.
Key Changes Under FinIA
- Independent portfolio managers, previously not subject to prudential supervision, are now regulated under the FinIA as financial institutions with a dedicated supervisory authority.
Other Revisions
The Financial Services Ordinance (FinSO) and Financial Institutions Ordinance (FinIO) also entered into force on January 1, 2020. The FinSO outlines financial service providers’ consultation and information duties, including provisions on prospectuses and key information documents, as well as their organizational requirements. The FinIO contains implementing provisions regarding the authorization conditions, duties, and supervision of financial institutions.
Industry Input
The Swiss Bankers Association provided extensive input for all three ordinances in the consultation phase, resulting in many of the solutions discussed in the working groups being incorporated into the final texts. However, some key regulatory approaches developed by the banking industry did not find their way into the final texts, prompting a detailed account of the additions and adjustments needed.
Conclusion
The revised financial market legislation aims to enhance legal certainty, competitiveness, and exportability of Swiss financial products and services. A successful Swiss financial center depends heavily on access to foreign markets, and the implementation of the FinSA and FinIA provides a foundation for this. The two acts were passed by Parliament after a five-year legislative process and entered into force on January 1, 2020.