Caplex FinSA

The clock is ticking for client advisers according to FinSA!

On 20 July 2020, FINMA (the Swiss Financial Market Supervisory Authority) approved the first registration office for client advisers (the BX Swiss AG). Client advisers who are subject to registration must therefore be entered in a recognized Register of Advisers by 19 January 2021.

What is the Register of Advisers?

The Register of Advisers is a publicly accessible register in which certain client advisers of domestic and foreign financial service providers must register. Pursuant to paragraph 28 FinSA, client advisers of Swiss financial service providers not subject to supervision pursuant to paragraph 3 FINMASA (the “Financial Market Supervision Act”) and client advisers of foreign financial service providers may carry out their activities only if they are entered in a Register of Advisers. However, only the client adviser himself, i.e. the natural person, is obliged to register. Legal entities cannot be registered.

The registration in the Register of Advisers is intended to ensure, on the one hand, that client advisers are aware of their obligations and treat clients appropriately. On the other hand, the Register of Advisers shall give clients the possibility to check the professional qualifications of their client advisers. However, the registration does not lead to a prudential and ongoing supervision and, accordingly, not to any supervisory review by FINMA or any other authority.

Who is considered a client adviser and is subject to registration?

According to paragraph 3 lit. e FinSA, those natural persons who perform financial services (such as investment advice, asset management or distribution of collective investment schemes) in their own capacity or of a financial service provider are qualified as client advisers. With the expiry of the FINMA distributor license at the end of 2019, all distribution and placement agents of collective investment schemes must therefore also be entered in the Register of Advisers, unless the financial institution is or will be subject to supervision by FINMA (e.g. as a manager of collective or individual assets). However, employees of financial service providers without client contact or employees who only support the financial service in a subordinate manner, e.g. working in the back office or performing administrative tasks for the client adviser (e.g. sales administration), are not required to be registered.

It is important to note that client advisers of prudentially supervised domestic financial service providers are exempt from the registration requirement. This refers in particular to client advisers of banks and of investment firms, but also of asset managers. Client advisers of foreign financial service providers who are subject to prudential supervision in their country of origin are also exempt from the obligation to register, provided that they provide their services in Switzerland exclusively to professional or institutional clients.

What do client advisers have to fulfill for the registration?

In order to be entered in the Register of Advisers, client advisers who are subject to registration must meet the following requirements in accordance with paragraph 6 FinSA:

  • they must have sufficient knowledge of the code of conduct set out in FinSA;
  • they must have the necessary expertise to perform their activities;
  • they must get a professional liability insurance or provide equivalent financial guarantees;
  • they themselves or the financial service provider for whom they work must be affiliated to an ombudsman.

In addition, the registration may be refused if the client adviser has been convicted of a criminal offence or has been entered in the criminal register for criminal offences against property, or if the client adviser is prohibited from performing an activity or practising a profession due to a violation of supervisory regulations pursuant to paragraph 33 FINMASA.

Since the registration requirements must be permanently complied with, financial institutions with client advisers are recommended to take organizational measures in this regard (e.g. an internal responsibility directive and/or a special FinSA directive, participation in further education or appropriate trainings). Violation or non-compliance with the registration requirements could also have undesirable consequences for the responsible financial institution, because financial service providers themselves are subject to the obligation to ensure that only client advisers work for them who are entered in the Register of Advisers. The lack of the ongoing supervision of whether the entry requirements for the Register of Advisers still exist is countered by the fact that the registration must be renewed every two years.

Is there a need for action?

As a financial service provider, you must check whether you provide a “financial service” within the scope of your business model and whether you are therefore considered a client adviser subject to registration in accordance with FinSA. As a rule of thumb, the person who is subject to registration is the person who provides investment advisory services without being subject to a licensing requirement under the Financial Institutions Act, or the person who offers financial services to clients in Switzerland from abroad, unless the foreign financial service provider in question restricts itself to professional and institutional clients. As already mentioned, client advisers must be entered in a Register of Advisers by 19 January 2021. After the end of this transition period until 19 January 2021, client advisers who are subject to registration must be entered in a Register of Advisers prior to commencing their activities, and also the registration requirements must be met at that time. Thus, if your financial institution has client advisers who are subject to registration, you should register them as soon as possible. In addition, you should ensure ongoing compliance with and monitoring of the registration requirements by means of internal instructions and directives as well as by appropriate contractual clauses.