FinSA/FinIA in a nutshell – changes for financial service providers

With special attention to FinTech business models

The two new Swiss financial market acts, Financial Services Act (FinSA) and Financial Institutions Act (FinIA), together with the corresponding ordinances have been in force since 1 January 2020. Together they are intended to create comparable competitive conditions for financial intermediaries within the existing financial market architecture and to improve customer protection. While FinSA provides rules of conduct for financial service providers, FinIA standardizes and revises the licensing regulations and creates a coherent supervisory regime for financial institutions.

The enactment of FinSA introduces cross-sectoral rules for the provision of financial services and the distribution of financial instruments. In terms of content, the new provisions are based on the existing EU regulations (MiFID II, Prospectus Directive, PRIIPS), although selective adjustments have been made to account for Swiss circumstances. The new Financial Services Act also divides the various client segments into private, professional and institutional clients for the first time. Also new are the prospectus requirements under FinSA, which now apply and replace the previous regulation in the Swiss Code of Obligations. In line with the EU Prospectus Directive, a so-called basic information sheet must also be prepared under certain conditions.

While previously there was neither an obligation to carry out a preliminary examination nor a review body with regard to the issue prospectuses, both will be incorporated into the current law with the end of the transitional provisions of FinSA on 1 December 2020. The start of the transitional period stipulated in Art. 109 FIDLEV will be triggered by the first two audit offices approved by FINMA, namely BX Swiss AG and SIX Exchange Regulation AG. Both are henceforth authorized and obliged to examine prospectuses for completeness, coherence and comprehensibility. The issuer is obliged to have its prospectus approved by one of the two review bodies prior to a public offer to purchase securities.

FinIA brings a fundamentally new change - asset managers of individual client assets, managers of assets of pension funds and trustees are now subject to prudential supervision. The asset management business will be expanded accordingly, alongside the traditional players of securities dealers, fund management companies and managers of collective assets.

FinTech and the new financial market laws

In principle, Swiss laws are applied in a technology-neutral manner. Companies that offer financial services and products in digital form, often in combination with blockchain or decentralized ledger technology (DLT), may therefore in principle fall under the new financial market laws. Particularly in connection with blockchain or DLT, there are specific questions that must be considered and legally classified when examining regulatory subordination and the resulting requirements. For example, what is the situation with payment and usage tokens? When do these qualify as financial instruments within the meaning of FinSA, with the resulting obligations for trading? What requirements are investment tokens subject to?

MME's FinSA/ FinIA series of articles

MME will report at regular intervals on the effects of the new framework legislation for financial service providers with a focus on questions of practical relevance. Particular attention will be paid to the players active in the FinTech sector and the extent to which they are covered or excluded by the new regulations. The following overview should already provide a first insight into the upcoming topics:

June 2020 | Author: Lucy Gordon, Romina Lauper

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