3. September 2020 Regulatory update

FINSA/FINSO - Practical application for managers

First step: Requirement for affiliation with an Ombudsman by 24 December 2020 - ASR proposal

A. Ombudsman affiliation

ASR wishes to inform you that we have selected FINOS www.finos.ch as the preferred Ombudsman for our clients.

We believe FINOS will provide an efficient and cost-effective solution.

We propose undertake the annual ombudsman affiliation process for your company to cover 2020 and 2021.

We will start processing applications in October to avoid the December backlog in light of the 24 December 2020 deadline.

Once affiliated with FINOS, a confirmation of affiliation will be sent by email to the designated compliance/legal person at your company.

If you wish ASR to undertake the Ombudsman affiliation for your company kindly revert to Anne and the team on finsa@armswissrep.com

B. Register of client advisers

We would like to inform you of that on 8 July 2020, the first registration body for client advisers (BX Swiss AG) has been authorized with effect from 20 July 2020.

• If your company is prudentially regulated and you are targeting exclusively professional and institutional clients, this does not apply to you company and this is for information purposes only.

• If your company is prudentially regulated and you are offering financial services directly to Swiss retail investors (private clients), your client advisers must submit an application to be entered in the register of advisers by 19 January 2021.

• If your company is not prudentially regulated, your client advisers must submit an application to be entered in the register of client advisers by 19 January 2021.

• Registration to client advisor register (prudentially regulated foreign services providers targeting exclusively professional and institutional clients are exempt)

ASR can assist with the assessment and the registration.

C. FINSA compliance services In addition to the Ombudsman affiliation service, ASR will be offering the full FINSA compliance solution services before the 31 December 2021 deadline as follows:

• Client segmentation process via access to a client database

• FINSA ongoing compliance requirement:

• If your company is not prudentially regulated, your client advisers must submit an application to be entered in the register of client advisers by 19 January 2021.
  (i) Organisational rules
  (ii) Code of conduct

• CISA (Swiss representative and Swiss paying agent) compliance assessment. Attached:

For further information, please contact:
Anne Empain
CEO, Head of Legal & Risk
Tel : +41 22 354 25 33
E-mail : anne@armswissrep.com

2. July 2020 Regulatory update

FINSA OMBUDSMAN – deadline 24 December 2020

We hereby inform you that on 24 June and 27 July 2020, the Swiss Federal Department of Finance (FDF) has approved the mediation bodies, listed in the attached document, to act as an ombudsman for financial service providers:

The legislation requires financial service providers to make an affiliation to an ombudsman within 6 months as of their approval, i.e. on or before 24 December 2020.

ASR will be working with FINOS, who will provide an efficient and cost-effective solution at preferential terms.

FINSA COMPLIANCE – deadline 31 December 2021

We would also like to remind you of the deadline of 31 December 2021 to comply FINSA’s provisions, more specifically:

• Client segmentation

• Rules of conduct

• Organisational rules

• Registration to client advisor register (prudentially regulated foreign services providers targeting exclusively professional and institutional clients are exempt)

1. December 2019 Regulatory update

GENERAL OVERVIEW of the changes for funds/managers distributing / marketing (offering) / to Swiss qualified investors (“Swiss QI”):

A. CISA rules will generally continue to apply for 24 months or until the manager of the foreign funds can demonstrate full compliance with applicable FINSA obligations. These obligations may include:

• Clients’ segmentation

• Organisational rules

• Rules of conduct on point of sales (institutional clients are exempt)

• Ombudsman appointment*

* Foreign fund managers / distributors of foreign funds will have to get affiliated with a Swiss Ombudsman (mediation body) within 6 months of the entry into force of FINSA or if such Ombudsman is not yet approved within the six-month of its approval by the Swiss regulator.

Since there are currently no practical guidelines on how to implement FINSA, application of CISA rules should be pursued for the time being.

B. MODIFICATION OF CURRENT CISA RULES and requirements for foreign funds offered to Swiss QI to appoint a Swiss representative (“SR”) and paying agent (“PA”) and ancillary requirements:

Subject to the fulfilment of the requirements detailed in the foregoing Section A, foreign funds will NO LONGER require SR and PA when offered only to certain categories of Swiss QI, in particular:

• Pension funds (public or private) with professional treasury operations (management), **

• Family office type structures with professional treasury operations,**

• Authorised independent Wealth Managers (such managers being considered as QI/professional during the authorisation process, if they are members of an SRO)

Foreign Funds will STILL require SR and PA when offering / distributing to / or if the following types of investors are already invested in the relevant foreign fund:

• HNWI

• Family office type structures with no professional treasury operations

• Advisors of the above (unregulated)

• Banks and other regulated entities if they offer foreign funds to HNWI with whom they (the banks and other regulated entities) have not entered into an investment management agreement (discretionary or advisory)

** A private investment firm or structure established for high net worth clients has a professional treasury when it appoints, internally or externally, an experienced person with financial qualifications to manage its long-term financial resources.

Regulatory status (authorisation) of Distributor under CISA will be abolished.

Therefore, there will be no longer the need to be duly authorised and supervised abroad or in Switzerland to offer a foreign fund in Switzerland. However, during the 24-month transition period or until the foreign funds’ managers can demonstrate that they comply with FINSA obligations, foreign managers/distributors may need to maintain the distribution agreements they have entered into with the SR.

C. Foreign fund managers / distributors of foreign funds and Client Advisor Register under LSFIN.

Employees working for prudentially supervised foreign asset managers offering funds exclusively to Institutional and Professional investors (including HNWI and their investment structures that wish to be considered as Professional investors) will be exempt for the Client Advisor Register requirement required by LSFIN. There is no reference to “equivalence” regarding the prudential supervision nor “reciprocity “test.

Conclusion & practical concerns

• Compliance with FINSA is compulsory within 24 months of the entry into force of the law

• Since there are currently no practical guidelines on how to implement FINSA, application of CISA rules should be pursued for the time being unless and until the fund manager can demonstrate compliance with FINSA

• Client classification / segmentation is paramount. It is required under both CISA and FINSA and will determine if a SR and PA must be continued / appointed after the transition period or upon complying with FINSA

• We are seeking clarification concerning FINSA compliance and applicable practical guidelines. Although the new rules come into effect as from 1 January, this should only be available within the next few months

• We will advise our clients to ensure compliance with FINSA rules