Update on the Federal Act on Financial Services («FinSA»)
Mr. Neri, what are the main objectives behind the introduction of the Federal Act on Financial Services («FinSA»), and who will be most impacted?
The Federal Act on Financial Services («FinSA») entered into force on 1 January 2020. The intent behind its introduction is to harmonize the competitive conditions in place for financial institutions and assets (in effect levelling the playing field). Also, these new regulations have been introduced in order to greater-protect clients and investors alike, along with creating an alignment with existing EU regulations (principally MiFID II).
The FinSA regulations directly apply to any provider of financial services which includes Swiss fund managers, foreign fund managers, and marketers who provide services such as fund distribution or engage in any marketing towards potential investors in Switzerland.
What are the fundamental differences between the existing Swiss financial market regulations, namely the Collective Investment Schemes Act («CISA»), its implementing ordinance («CISO») and the FinSA (FinSO being its implementing ordinance)?
Broadly speaking, the FinSA has a larger scope than the CISA since it covers several financial services and instruments (and not only funds). With the entry into force of the FinSA, the CISA has become the product-specific legislation governing funds. The FinSA has also revised the CISA on various aspects. In terms of definitions for instance, the adoption of the FinSA has resulted in the removal of the reference to the practice of fund «distribution» from Swiss financial regulations. This term, which was globally understood by the asset management industry, has been replaced by a concept known as «offering». Fund managers and marketers offering their funds in Switzerland must respect a series of new obligations defined by the FinSA:
- Completion of detailed client segmentation
- Adherence to the FinSA Code of Conduct
- Respecting the FinSA Organizational Measures
- Affiliation with a Swiss Financial Ombudsman (if applicable)
- Completion of entry into a Client Advisor Register (if applicable)
These new regulatory concepts, coupled with the new obligations, may indeed seem complex to non-Swiss based financial institutions and present potential delays entering the market here. However, the FinSA has also lowered the regulatory burdens on foreign fund managers targeting only Institutional and/or Professional investors as they will no longer be required to appoint a Swiss Representative & Paying Agent; except if they wish to also market their funds to High-Net-Worth-Individuals (HNWIs) and small family offices. Indeed, under the FinSA HNWIs must now explicitly express their wish to be considered as Professional Investors before being contacted by alternative fund managers and marketers (hedge fund and private equity fund managers typically).
In this new regulatory environment, we firmly believe that ACOLIN is well-positioned to act as a local partner to existing and new clients, to help them keep or gain rapid access to Swiss investors while being compliant with Swiss regulations.
Is there a transitional phase in place to allow foreign fund managers time to adapt to the new regulations?
Yes, in spite of the FinSA entering into force on 1 January 2020, a two-year transitional phase was announced to give foreign fund managers & marketers time to become compliant with the new regulations (FinSA new client segmentation, Code of Conduct, Organizational Measures). The transitional phase will end on 31 December 2021.
Please also note that until foreign fund managers and marketers can prove they are compliant with the FinSA, a Swiss Representative and Paying Agent must be maintained to market foreign funds to non-regulated Qualified Investors (typically pension funds, family offices, and HNWIs).
ACOLIN advises its clients to undertake all necessary internal reviews in a timely manner, and as ever remains at hand to assist with any enquiries, or offer guidance on the FinSA when needed.
What solutions can ACOLIN offer, Mr. Royer?
Through its Swiss Distribution Compliance Solution, ACOLIN is confident it can help new and existing clients both navigate and meet the evolving financial market regulations in Switzerland. This service offers a tailored and comprehensive solution to fund managers and marketers targeting Qualified Investors (Professional & Institutional) in Switzerland, addressing each of the FinSA obligations directly in a step-by-step manner.
Clients will have the opportunity to conduct an initial needs assessment, after which the ACOLIN team will outline the steps required to achieve compliance with the FinSA. Pro-active assistance will be offered towards meeting each of the FinSA obligations that apply to them. Initial & ongoing due diligence on all relevant documentation will be performed, and conducted with focus and professionalism.
Overall, we aim to provide first-class service and support, utilizing the team’s significant expertise and experience, along with leveraging ACOLIN’s longstanding reputation as a leader in the Swiss fund services domain.
How can current and prospective clients learn more about the ACOLIN Swiss Distribution Compliance Solution?
We would be delighted to discuss and introduce both new and existing clients to our Swiss Distribution Compliance Solution. To learn more, please visit our webpage, which also contains our Service Sheet, at the link: acolin.com/services/swiss-compliance
Simply click «Open PDF» below «Compliance Solution» as you approach the end of the page. The Operations Manager of ACOLIN Geneva, Antoine Royer, can also be reached directly via the contact form at the bottom of the page. Equally, we are also available via the below methods, to offer our assistance:
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Jérôme Neri has 20 years’ experience in banking and law in Switzerland, with a strong focus on the international investment fund industry. He now leads the ACOLIN Geneva Branch where he supports and develops existing relationships between ACOLIN and asset managers, fund managers and distribution partners. Before joining ACOLIN in January 2017 he co-developed Carnegie Fund Services, a start-up, from three people to 30, where he held several positions such as Attorney-at-law, Head of Legal and Deputy CEO. He was since the beginning also a member of the Board and a shareholder. Prior to joining Carnegie he worked for BNP Paribas (Suisse) S.A. as the financial products and services department's legal counsel. He was responsible for the Swiss representation of the BNP Paribas Group’s investment funds, where he acquired a sound practical experience in the areas of fund registration with FINMA and establishment of a distribution network in Switzerland. Previously he worked for Ferrier Lullin & Cie SA as the Asset Management's legal counsel, where he drafted and negotiated private placement and distribution contracts and acquired a solid knowledge of the fund industry. Jérôme Neri is an Attorney-at-law (Geneva Bar) and holds an LL.M degree of Duke University, North Carolina, United States.
Antoine Royer has 15 years of fund industry, asset management, and private banking experience. He manages operations of the Geneva branch of ACOLIN which offers Swiss Fund Representation services to alternative managers interested in marketing their funds in Switzerland. Before joining the ACOLIN group in 2016, he was Hedge Fund Analyst at Mirabaud & Cie in Geneva, responsible for the selection of Hedge Funds and the monitoring of invested managers. He was also involved in the portfolio construction and in advisory and marketing as well as servicing the bank’s relationship managers. Prior to joining Mirabaud Antoine Royer was an investor Specialist at J.P. Morgan Suisse in Geneva, where he was in charge of managing portfolios for private clients. He holds a master degree in International law from IHEID (Geneva Graduate Institute of International and Development Studies) as well as a bachelor degree from the Institut d'Etudes Politiques of Toulouse.