What FINMA Regulation Actually Protects for Private Clients
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FinIA / FinSA & Compliance
FinIA and FinSA are the two acts that have governed the profession of the independent wealth manager in Switzerland since 2020. The Financial Institutions Act (FinIA) makes the activity subject to authorisation and places wealth managers under ongoing supervision by a supervisory organisation approved by FINMA. The Financial Services Act (FinSA) sets out the rules of conduct towards clients, from information and due diligence to the appropriateness and suitability assessments.
The essentials
- A wealth manager is a person or firm that, under a mandate, has power of disposal over clients' assets on a commercial basis, in the clients' name and for the clients' account (art. 17 para. 1 FinIA). A wealth manager requires authorisation from FINMA (art. 5 para. 1 FinIA). When applying for authorisation, the wealth manager must prove that it is subject to supervision by a supervisory organisation (art. 7 para. 2 FinIA). The supervisory organisation carries out the ongoing supervision and itself requires authorisation from FINMA (art. 43a FINMASA).
- Wealth managers must hold adequate own funds at all times: at least one quarter of the fixed costs in the last annual financial statements, but no more than ten million francs (art. 23 FinIA).
- FinSA requires financial service providers to observe rules of conduct towards clients, including duties of information, due diligence and transparency, as well as the suitability or appropriateness assessment before providing a service (art. 7 to 18 FinSA).
- Client advisers must be entered in the register of advisers if they work for a foreign financial service provider or for a Swiss financial service provider that is not supervised under art. 3 FINMASA (art. 28 para. 1 FinSA). Client advisers of authorised wealth managers are not affected by this duty, because the wealth managers themselves are supervised under art. 3 FINMASA. Client advisers of foreign financial service providers are exempt from the duty to register if the financial service provider is subject to prudential supervision abroad and the client advisers serve exclusively professional or institutional clients in Switzerland (art. 28 para. 2 FinSA, art. 31 FinSO). Separately from the register, a financial service provider that serves retail clients must be affiliated to an ombudsman (art. 77 FinSA).
Sources: FinIA Art. 23, Own funds (fedlex) · FinSA Art. 77, Duty to affiliate (fedlex) · FINMASA Art. 43a, Supervisory organisation (fedlex) · FinSA Art. 28, Duty to register (fedlex) · FinSO Art. 31, Exemption from the duty to register (fedlex) · FINMASA Art. 3, Supervised persons and entities (fedlex) · FinIA Art. 5, Duty to obtain authorisation (fedlex) · FinIA Art. 7, Authorisation conditions (fedlex) · FinIA Art. 17, Definitions (fedlex)
Frequently asked questions about FinIA / FinSA & Compliance
Yes. Since the Financial Institutions Act of 2020, managing third-party assets on a commercial basis requires authorisation. FINMA grants the authorisation, while a supervisory organisation approved by FINMA carries out the ongoing supervision. The wealth manager must also mandate an audit firm or be audited by the supervisory organisation itself.
FinIA governs the institutional side: authorisation, organisation, own funds and supervision of the financial institution. FinSA governs conduct towards clients: information, due diligence, transparency and the suitability and appropriateness assessments. A wealth manager must comply with both acts, as they cover different sets of duties.
The supervisory organisation monitors on an ongoing basis whether the wealth manager complies with the duties under FinIA, FinSA and the Anti-Money Laundering Act. It reviews organisation, risk management, own funds and rules of conduct in particular. The review is risk-based and does not necessarily take place every year. In years without a periodic audit, the wealth manager submits a report.
No. A wealth manager with an authorisation from FINMA is supervised under art. 3 FINMASA. The fact that a supervisory organisation carries out the ongoing supervision does not change this classification. The client advisers of the wealth manager are therefore not subject to the duty to register under art. 28 para. 1 FinSA. The duty applies to client advisers who work for a Swiss financial service provider that is not supervised under art. 3 FINMASA. It also applies to client advisers of foreign financial service providers, unless both of the following conditions are met: the financial service provider is subject to prudential supervision abroad, and the client advisers serve exclusively professional or institutional clients in Switzerland (art. 28 para. 2 FinSA, art. 31 FinSO).
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This overview is for general information purposes only and does not constitute investment, legal or tax advice. It is a simplified summary of the legal position and tax treatment.
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