The New Registration Duty For Client Advisers – An Update On The Final FinSO

Author:Dr. Martin Peyer
Profession:Baer & Karrer
 
FREE EXCERPT

Reference: CapLaw-2019-55

On 6 November 2019, the Federal Council decided that the Financial Services Act (FinSA) would enter into force on 1 January 2020. Subject to a transition regime, the FinSA will introduce a new registration duty for client advisers of Swiss financial service providers not subject to prudential regulation and client advisers of foreign financial institutions. Today, no such registration requirement exists with the exception of similar obligations for untied insurance intermediaries, who have to register with the public register kept by the Swiss Financial Market Supervisory Authority (FINMA).

Under the new regime, client advisers will be required to register in a register maintained by one or more registration bodies licensed by FINMA. To register, they must evidence sufficient knowledge of the rules of conduct under the FinSA and the necessary expertise to perform their duties, adequate financial means as well as affiliate themselves with an ombudsman's office. Clients may check the register at any time to verify that their adviser has the required qualifications. The registration will, however, not imply any prudential or ongoing supervision by FINMA. If a client adviser no longer meets the registration requirements, the adviser will be deleted from the register by the competent registration body and may, consequently, no longer engage in activities as a client adviser.

1) Introduction

Client advisers play an important role in implementing the new rules of conduct in articles 7 ff. FinSA. They are usually the primary point of contact for clients with their financial service provider and, only if they have sufficient knowledge of the new rules, they can comply with them in practice.

The responsibility to ensure that its client advisers will comply with the requirements of the FinSA lies with the financial service providers. In particular, they must ensure that their advisers have an appropriate education and the necessary skills for the specific services they provide (article 6 FinSA). For prudentially supervised financial service providers, FINMA or a supervisory organization pursuant to the Financial Institutions Act (FinIA) will monitor that client advisers comply with these requirements. No such controls exist, however, for Swiss and foreign financial service providers that are not supervised by FINMA.

To bridge this gap, the FinSA will require client advisers of Swiss financial service providers who are not prudentially supervised (such as insurance intermediaries and financial advisers) and financial service providers domiciled abroad to register themselves in the new register of advisers that will be established under the FinSA (article 28 (1) CapLaw 5/2019 | FinSA (FIDLEG) page 28 FinSA) (see Dispatch by the Federal Council on the Financial Services Act and the Financial Institutions Act of 4 November 2015, Federal Gazette 2015 (Dispatch FinSA), page 8901 ff., page 8967). In addition, to protect clients, client advisers who have seriously breached the rules of conduct in the past will not be allowed to register themselves and, thus, to provide financial services. Further, advisers - or the financial service provider for which they work - must guarantee that they have sufficient financial resources to carry out their business activities (see Dispatch FinSA, page 8922).

The registration will, however, not imply any prudential or ongoing supervision by Swiss authorities. It only seeks to ensure that client advisers are aware of the rules of conduct and treat clients fairly. Yet, clients may check the register, which will be available over the internet, at any time if they have doubts about the qualifications or integrity of their client adviser (article 32 (5) FinSA), and, therefore, the new register is also expected to increase clients' confidence in their client advisers.

2) Duty to Register for Client Advisers

  1. Definition of Client Adviser

    According to article 3 (e) FinSA, a client adviser is a natural person who performs financial services on behalf of a financial service provider or in its own...

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