FinSA/FinIA: Ready For Takeoff – The Federal Council Releases The Final Versions Of The Ordinances Implementing The FinSA And FinIA

Author:Dr. Rashid Bahar and Peter Hsu
Profession:Baer & Karrer

On 6 November 2019, the Federal Council formally decided that the Federal Act on Financial Services of 15 June 2018 (FinSA) and the Federal Act on Financial Institutions of 15 June 2018 (FinIA) would enter into force on 1 January 2020 with a phasing period of up to two years. Furthermore, the Federal Council published the three ordinances implementing this legislative package, the Ordinance on Financial Services (FinSO), the Ordinance of Financial Institutions (FinIO), and the Ordinance on the Supervisory Organisations. As part of this process, the Federal Council clarified certain topics raised in the consultation process. This briefing summarises the main changes introduced by the final versions of the ordinances in comparison with the draft published in the consultation proceedings.

Clarification regarding the scope

Definition of financial services The FinSO clarifies the scope of the FinSA in several important aspects: first of all, the FinSA takes a middle of the road approach to defining the financial service of selling and purchasing financial services, departing from the much more extensive view taken in the draft ordinance, which included distribution generally as part of this financial service. The FinSO defines selling and purchasing securities as actions directed at a specific client aiming specifically to sell or purchase securities (article 3 (2) FinSO). This definition substantially narrows down the scope of activities in the distribution chain that constitute financial services. It marks a welcome departure from the overreaching approach that was presented in the consultation proceedings.

Consequently, only true sales-related services to clients will be within the scope of the rules of conduct and the organisational duties and, if applicable, client advisor registration obligations of the FinSA. In the same vein, the final version of the FinSO dropped the provisions restricting marketing of financial instruments. At the same time, it is important not to overstate the scope of this clarification: the materials suggest that a roadshow presentation would be enough to constitute a financial service. This raises a substantial uncertainty considering the fact that an offer does not constitute a financial service. Moreover, article 127a of the Collective Investment Schemes Ordinance (as amended by the FinIO) provides that all advertisement for foreign collective investment schemes triggers the obligation to appoint a Swiss representative and a paying agent.

Corporate finance services and lending

A further clarification concerns the applicability of the FinSA to corporate finance advisory services. Indeed, unlike MiFID II which applies under certain circumstances to corporate finance advisory services, as so-called ancillary services, FinSA did not specifically include these services in the catalogue of financial services subject to the new regulations. There was, however, a level of uncertainty about whether such services would nevertheless be in-scope as they constitute - in a very broad sense - advice in connection with the sale and purchase of financial instruments, although this was not the focus of the legislative reform. Therefore, a further positive outcome of the consultation proceedings is the clarification that corporate finance advisory services, including M&A advisory and advice regarding capital raising, the placement of financial instruments, with or without underwriting, and financing in connection with such services do not constitute financial services (article 3 (3)(a)-(d) FinSO). Furthermore, the FinSO also clarifies that "a loan is deemed to finance the purchase of securities" only if the financial service provider is also engaged in the underlying transactions or is aware that the credit will be used to fund such...

To continue reading