Financial Services Act and Financial Institutions Act: Federal Council establishes principles for shaping three areas

Bern, 24.06.2015 - During its meeting today, the Federal Council established principles for the specific shaping of three areas of the Financial Services Act and the Financial Institutions Act. Its decisions concern the supervision of asset managers, training and continuing professional development, and the issue of enforcement costs.

The Financial Services Act (FinSA) governs the prerequisites for providing financial services and offering financial instruments. The Financial Institutions Act (FinIA) makes provision for an activity-based, differentiated supervisory regime for financial institutions. The new provisions should strengthen client protection, enhance the competitiveness of the financial centre and reduce competitive distortions between providers by creating a level playing field.

The Federal Council took note of the outcome of the consultation on both bills in March 2015. It also took initial decisions on the direction to be taken and instructed the Federal Department of Finance (FDF) to prepare the dispatch by the end of 2015. During its meeting today, it set the specific form of the supervision of asset managers as well as training and continuing professional development (CPD). It also decided on a policy for solving the issue of enforcement costs. Furthermore, it received information on the current status of the regulatory impact assessment.

The subjection of asset managers to prudential supervision provided for in the consultation draft was welcomed by most of the consultation participants. Two types of supervision were put forward in the consultation: supervision either by FINMA or by a new supervisory organisation which is to be created. Talks were held with sector representatives with a view to shaping this supervision, which must meet both the needs of those concerned and the requirements of independent supervision. Due to the higher degree of acceptance shown, the Federal Council decided today that supervision would be performed by a supervisory organisation and defined the parameters for this supervision. The independent supervisory organisation will be authorised and supervised by FINMA. A risk-based regime is envisaged for the supervisory activity. For smaller asset managers with lower risk potential and straightforward structures, the audit frequency may be increased from one year to a maximum of four years. The supervisory organisation will perform supervision independently, and the possibility of establishing more than one supervisory organisation where necessary should be left open.

The rules on training and CPD will be expanded slightly from their form in the consultation draft. The principle of only allowing client advisers with adequate training and CPD to provide client advice, to which no objections were raised in the consultation, will be developed further to include the responsibility of financial service providers, who must ensure that their client advisers have the required training and CPD. Within the scope of self-regulation, the individual sectors should set the minimum training and CPD requirements for each activity.

With the establishment of either a court of arbitration or a fund for litigation costs, the consultation draft had made provision for two variants that could have resolved the issue of the costs of civil proceedings in favour of private clients. However, both proposals were rejected in the consultation. The new solution provides for an exemption from the payment of guarantees and advances on proceeding costs. This overcomes a considerable initial obstacle for the initiation of civil proceedings. Furthermore, financial service providers must cover their own litigation costs even if they win the case, which thus lowers the risk for clients vis-à-vis litigation costs. The primary prerequisite for this is that the amount in dispute does not exceed CHF 250,000 and proceedings are held before an ombudsman beforehand. This will both strengthen the ombudsman system and promote efficient proceedings. Finally, the court can divide up the court costs at its discretion under certain conditions.

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