FinSA – FinIA: a new MiFID II?

The new regulatory framework, FinIA and FinSA and their corresponding Ordinances, that came into force in January 2020 in Switzerland significantly modify the way financial firms have to operate. Not only does it bring into scope a range of financial actors that will have to be directly authorised by the FINMA, but it also strengthens the investors’ protection rules by adopting fully or partially some of MiFID II , PRIIPS and Prospectus Regulation principles adjusted to reflect upon the specific Swiss circumstances (e.g. client categorisation, assessments of suitability and appropriateness, information to clients, client agreements, documentation and reporting obligations, best execution or conflict of interests).

Whilst the new regulatory framework applies starting January 2020, the Regulator has planned for transition periods for institutions that where not directly authorised by the FINMA. Firms that are already authorised need to comply with the new provisions as of the entry into force of the new rules. For others, new rules provides for a progressive implementation and whilst nothing precludes for early compliance the applicability of certain new provisions is linked to the applicability of others which will requires a thorough impact analysis if considering a gradual implementation.

It may seem that there is time to start considering the necessary changes that have to be implemented: it is not the case. Firms need to start preparing for the change as soon as possible as they will have to among others:

      1. Map the changes
      2. Analyse their current systems and controls to identify any gaps and carry-out a full impact study
      3. Design the new Policies and Procedures, including governance arrangements
      4. Transform or adjust their operating models
      5. Train their employees to ensure that the new processes are embedded in the Firm culture and operations

 

MiFID II came into force in January 2018, 2 years ago and many firms are still struggling to ensure full compliance: FinIA and FinSA are expected to modify the regulatory landscape in a similar fashion and therefore it is paramount to start preparing momentarily.

 

FinSA insights

Significant shortcomings existed under previous financial services law in the area of code of conduct and product regulations. The new framework aims at establishing a level playing field between financial intermediaries and strengthens client/investor protection to enter fully into the 21st century and underpin EU equivalence decision (e.g. third country access) whilst preserving Swiss particularisms.

FinSA provisions amend substantially investor protection regulatory framework by introducing among others:

      • A new client classification
      • Client profiling requirements (e.g. suitability, appropriateness)
      • Duty to provide information
      • Documentation and reporting obligations
      • Ombudsman

 

The new provisions aim at mirroring MiFID II framework. Hence several substantial differences remain such as, but not limited to inducements rules, client segmentation provisions or content of the basic information sheet. Generally the Swiss framework is less prescriptive and provides firms with more flexibility. However, MiFID II may offer interesting insights on how to comply with the new rules and provide useful guidance on the concepts introduced by this new regulatory framework.

Deontea with its extensive expertise of the EU and of the Swiss regulatory framework may guide you in implementing the new required systems and controls whilst ensuring they remain proportionate and tailored to your business model and activities.

by Caroline Michel, Director