FIDLEG Compliance 2025: New rules of conduct and practical implementation

FINMA Circular 2025/2 significantly tightens the transparency obligations for Swiss financial service providers. With entry into force on January 1, 2025 and staggered transition periods until June 30, 2025, banks, asset managers and securities firms had to fundamentally revise their compliance processes.

The most important points at a glance

• New definition of advice : clear distinction required between transaction-related and portfolio-related investment advice
• CFD tightening : Quarterly loss statistics for private clients become mandatory
• Bulk risk warning : thresholds of 10% (individual securities) and 20% (issuers) trigger information obligations
• Granular suitability test : knowledge must be requested separately for each investment category
• Conflict of interest management : Stricter rules for own financial instruments
• Retrocession transparency : Visual highlighting in contracts and generally free information

Legal framework and deadlines

FINMA published Circular 2025/2 “Duties of conduct under FinSA/FinSO” on October 31, 2024 in response to deficiencies identified during on-site inspections, where the majority of the institutions inspected were found to be in need of improvement.

The entry into force is staggered : While most of the provisions have already applied since January 1, 2025, FINMA is granting transitional periods until June 30, 2025 for particularly complex implementation requirements. These relate in particular to CFD reporting, bulk risk information and the visual highlighting of retrocession disclosures.

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The six key areas of change

The changes relate to six key areas:

1. Clear delineation of forms of advice

Financial service providers must clearly document whether they are providing transaction-related or portfolio-related investment advice before or at the latest when providing the service. In the case of transaction-based advice, it must be explicitly stated that the advice is purely instrument-based and that the client portfolio is not taken into account.

Documentation can be provided in the form of written contracts or other forms that can be verified by text. Documented declarations at the time the advice is given are also permissible.

2. Stricter CFD risk disclosure

Providers of contracts for difference (CFDs ) must inform private customers comprehensively about specific risks. These include margin calls, unlimited risk of loss, leverage effects and market risks such as “slippage”.

Quarterly reporting obligation : CFD providers must provide information every three months on the percentage of private clients who have lost money in the last 12 months:

• Have lost money
• Have suffered a total loss of their margins when closing a position
• Had to pay a negative balance after closing a position

For new market participants without a sufficient track record, the EU standard warning applies for the time being: “Between 74% and 89% of retail investor accounts lose money when trading CFDs.”

3. Bulk risk information obligations

In the case of asset management and portfolio-related investment advice, financial service providers must provide information about unusual concentrations of risk if these are not excluded.

Thresholds for risk warnings :

• 10% or more in individual securities
• 20% or more for individual issuers

Concentrations caused by collective investment schemes that are subject to regulatory risk diversification rules are excluded. The calculation must be holistic and also include cash holdings and Lombard loans.

4. Granular suitability test

The appropriateness and suitability test will become more specific. Financial service providers must ask their clients about their knowledge and experience separately for each relevant asset class used in the financial service.

In the case of asset management and portfolio-related advice, this takes into account the investment strategy and product types used. The granularity must be adapted to the complexity and risk profile of the investments.

Important : A blanket question about “experience in the financial sector” is no longer sufficient. A survey of net assets is also only sufficient if it can be proven that customers can calculate their own loss-bearing capacity.

5. Conflict of interest management for proprietary products

Financial service providers must clearly disclose whether their market offering comprises only own, own and third-party or only third-party financial instruments.

If own and third-party products are taken into account, appropriate measures must be taken to avoid conflicts of interest:

• Defined selection process with industry-standard, objective criteria
• No specific remuneration incentives for own financial instruments
• Functional, personnel and informational separation between product creation and distribution

Unavoidable conflicts of interest must be disclosed in detail - blanket references to the consideration of own and third-party products are not sufficient.

6. Retrocession transparency

Information on compensation paid by third parties must be visually highlighted in form contracts - for example in bold type, larger font, color or a border.

Bandwidth information : If the exact amount is not known before the contract is concluded, financial service providers must provide information on:

• Bandwidths by financial instrument class
• In the case of asset management and portfolio-related advice, additionally: bandwidths in relation to portfolio value and investment strategy

Information on retrocessions actually received must be provided free of charge on request. Moderate flat-rate fees are only permissible in the case of extraordinary expenses (e.g. information several times a year).

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Practical implementation challenges

In order for the new regulations to be implemented in practice, work needs to be done on three levels in particular:

IT system adjustments

Quarterly CFD reporting requires automated monitoring systems. All costs (fees, charges, commissions) must be included in the calculation and execution-only transactions must also be taken into account.

Documentation effort

Financial service providers must review all of their client documentation :

• Investment advisory and asset management agreements
• Client information documents
• Risk profiling questionnaires
• Retrocession disclosures

Training requirements

Employees require intensive training on the new requirements, in particular

• Differentiation between forms of advice
• Granular suitability checks
• Conflict of interest identification and management
• Correct risk disclosure

Market impact and competitive dynamics

The stricter compliance requirements will lead to market consolidation. Smaller financial service providers will face disproportionate burdens, while established players with better compliance resources will gain competitive advantages.

Technology-savvy asset managers such as FINMA-regulated providers with systematic, quantitative investment approaches could benefit: Automated risk profiling, transparent factor-based product selection and digital documentation make compliance implementation much easier.

The short implementation deadlines - in some cases only a few weeks between publication and entry into force - signal regulatory pressure and the urgency of FINMA’s priorities.

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Recommendations for financial service providers

You should review these points as soon as possible:

• Gap analysis of existing processes against new requirements
• Prioritization according to transition periods (30 June 2025 for complex areas)
• Budget planning for IT adaptations and external consulting

Implementation of these points was also required by June 30, 2025

• Complete revision of customer documentation
• Implementation of automated monitoring systems
• Implementation of comprehensive employee training
• Testing and validation of new compliance processes