New Amendments to the drafts FinSO, FinIO and SOO
After the adoption of the Financial Services Act (FinSA) and the Financial Institutions Act (FinIA) in June 2018, the draft ordinances in relation to such acts, the FinSO, the FinIO and the SOO were made available and are currently subject to a consultation procedure. The Federal Council is expected to take a final decision on the texts of such ordinances in the beginning of November 2019.
The Federal Department of Finance has anticipated the key points on which the draft ordinances are to be amended. The main amendments can be summarized as follows:
- According to FinSA, several activities qualify as “financial services”, such as the "acquisition and disposal" of financial instruments. The draft FinSO mentioned "intermediation” as an example of “acquisition and disposal” of financial instruments (Art. 3 FinSO). The reference of “intermediation” has now been deleted from the text of the ordinance, which certainly avoids misinterpretations as not only intermediaries but also other parties may provide services directed to the acquisition and disposal of financial services.
- Services like corporate finance or those related to the acquisition and restructuring of companies are clearly excluded from the term "financial services" and therefore also from the scope of application of FinSA (new in Art. 3 FinSO).
- Art. 14 para. 2 of FinSO is deleted and therefore financial services providers will no longer have a duty to inform the customer about risks and costs in case of material changes to the information provided before.
- Foreign customer services representatives of professional and institutional customers which are under prudential supervision are not required to be registered, despite the fact of whether they are subject to consolidated supervision by FINMA, which was also a requirement according to the last draft (Art. 31 FinSO);
- In case of execution-only services, the Key Information Document (KID): a) is considered to be available when "it can be found with reasonable effort"; and b) can be provided, in agreement with the customer, after subscription or conclusion of the contract. Both of these changes will make the provision of execution-only services more efficient.
- The KID for collective investment schemes is also accepted in English language.
- The prohibition related to the advertisement of financial instruments which are not approved or are not according to the customer profile has been removed (Art. 95 para. 3 FinSO). The removal of this prohibition does not mean that such advertisement is free of legal consequences. Misleading or false advertisements are already covered by the Federal Act on Unfair Competition. Moreover, the relationship between the financial services provider and the customer is clearly separated from the advertisement of financial products.
- The concepts of “business and family ties” (Art. 2 para. 3 FinIO) and “assignments regulated by the law” (trustees and company treasury) which embody exceptions from the scope of application of the FinIA have been specified;
- Clearer requirements on the organization of institutes and outsourcing are provided;
- Preciser definition of the "commercial nature" of activities (Art. 3 FinIA), which is a condition for the application of several disposition of FinIA;
- The possibility to be regulated by a supervisory organization as an asset manager and as a trustee is made conditional upon the existence of a legally established professional secrecy (Art. 13 FinIO);
- More detailed requirements on professional experience and education for asset managers and trustees have been issued (Art. 18 para. 1 FinIO).
The entry into force of FinSA and FinIA and their implementing ordinances is set for January 1, 2020. Transitional periods of two years have been established for provisions like customer segmentation, required knowledge for customer representatives, conduct rules, organization or the key information document.
Further updates will be published regularly.
Judith RaijmakersPartner Attorney at law
Judith Raijmakers, attorney at law, is a partner in our Zurich and Luxembourg offices. She focuses on finance transactions including acquisition financing, asset financing, real estate and transportation financing, debt (re)structuring and debt issuances.T: +41 43 434 67 24 M: +41 79 870 91 03 E: firstname.lastname@example.org
Diana LafitaAssociate Attorney at law
Diana Lafita, attorney at law, is a member of the Banking and Finance practice group in our Zurich office. She focuses on banking, insurance and capital markets regulatory and private matters.T: +41 43 434 67 49 M: +41 79 368 25 59 E: email@example.com