Licensing Swiss Managers - Set-up and Conditions under Current Regulatory Framework and Future Fidleg - Impact of MIFID II MIFIR.

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1 STRUCTURING IN SWITZERLAND POST FIDLEG & AML REVISION Licensing Swiss Managers - Set-up and Conditions under Current Regulatory Framework and Future Fidleg - Impact of MIFID II MIFIR. Comparison with Malta and Dubai. FUTURE STRUCTURE OF THE ASSET MANAGER BUSINESS 10 APRIL

2 THE SWISS FINANCIAL SERVICES SECTOR 10.3 % of the GDP 6.2 % Employment Share Worldwide, the largest provider of private banking A large part of it is generated in the context of cross-border services to foreign customers. 10 APRIL

3 SWISS MARKET PLAYERS 344 Banks and Securities Dealers 314 Raiffeisen Banks 223 Insurance Companies 127 Asset Managers of Collective Investment Schemes 17 Market Infrastructure Institutions 365 Distributors Insurance Intermediaries 380 DUFI (Intermediaries directly supervised by FINMA for AML) Several thousands of non-supervised/self regulated asset managers and investment advisors Source: FINMA 10 APRIL

4 IN COMPARISON: MALTA: 26 Credit Institutions 29 Financial Institutions 60 Insurance Institutions 15 Insurance Intermediaries: Companies 566 Insurance Intermediaries: Individuals 47 Pension Scheme 100 Investment Managers 13 Investment Advisors 28 Recognized Fund Administrators DUBAI: 10 APRIL

5 CH A WELL INTEGRATED ISLAND 10 APRIL

6 EU POST CRISIS REGULATION JUNGLE SUMMARY OF TERMS: Basel III / CRD IV Banking Act And FINMA Guidelines and Oridinances UCITS V Next CISA? Federal Collective Investment Schemes Act Draft Revised Swiss AML Act MAD II Draft FFSA + Next SESTA? Federal Act on Stock Exchanges and Securities Trading MiFID II MiFIR Draft FFSA Federal Financial Services Act EMIR Draft FMIA Financial Market Infrastructure Act AIFMD CISA Federal Collective Investment Schemes Act PRIPS? + TAX Matters: US FATCA + EUSD 2 MAD Market Abuse Directive MIFID Markets in Financial Instruments Directive MIFIR EMIR European Market Infrastructure Regulation UCITS Undertakings for the collective investment in transferable securities PRIPS Packaged Retail Investment Products CRD Capital Requirements Directive EUSD European Union Savings Directive 10 APRIL

7 FEDERAL FINANCIAL SERVICES ACT (FFSA) The FFSA shall cover: PROVIDERS OF FINANCIAL SERVICES + 10 APRIL

8 FEDERAL FINANCIAL SERVICES ACT (FFSA) + ACTIVITY 10 APRIL

9 WHY THE FFSA? Enhanced Investor Protection Level Playing Field for all Financial Service Providers Cross-sectoral Perspective In accordance with applicable international standards (Integrity) Strengthening domestic competition Strengthening international competition Enhanced Quality and Preservation of Reputation of Swiss Financial Services. 10 APRIL

10 SCOPE of the FFSA - PRODUCTS All issuance of securities (debt or equities) shall be subject to a prospectus stating the terms of the issue, the issuer, the fees and the responsible persons, including all risk factors, etc., available to investors at all times. A Key Investor Document (KID) must also be issued summarizing all terms of the issue available to investors at all times. Continuing Information to be in place relating to product information and valuation. The Prospectus and KID shall be subject to regulatory approval. The Prospectus/KID must be publish on the day when the marketing starts. 10 APRIL

11 SCOPE of the FFSA INTERNAL AND SERVICE ORGANIZATION Financial service providers must inform their clients of the content and costs of the service they are providing, as well as the characteristics, costs and risks of products offered, before they provide any financial service. 9. Before executing a transaction, financial service providers should establish the knowledge and experience of the client with respect to the transaction in question. If they consider a transaction to be inappropriate, they should make this known to the client. Prior to issuing a recommendation, as well as in the context of asset management mandates, financial service providers must assess whether a transaction is suitable for the client. 10. Financial service providers must document the scope and object of the agreed service as well as their efforts to establish the suitability and appropriateness of the transaction for the client. They must also account for the services in question in a transparent manner. 11. In particular, financial service providers should take measures to avoid conflicts of interest between themselves or their staff on the one hand and their clients on the other. FUTURE 12. STRUCTURE Remuneration OF AN received ASSET from third parties 10 APRIL should 2014be disclosed, and should only be 11 MANAGER permissible IN SWITZERLAND if the interests of the client are preserved and the payment has the effect of increasing the

12 SCOPE of the FFSA - TARGETED INTERMEDIAIRIES All Financial Intermediaries in Switzerland will be subject to supervision by FINMA or super-sro. This also includes the following intermediaries which are not yet subject to a regulatory framework (except AML and/or code of conduct): Discretionary Portfolio Managers; Financial Advisers; Execution Only; Other Intermediaries not currently subject to FINMA. FFSA will also apply to intermediaries currently subject to regulatory surveillance by FINMA. For distributor and insurance intermediaries, a FSA-type model will be in place approval of individuals as advisors. 10 APRIL

13 SCOPE of the FFSA? All Financial Intermediaries in Switzerland will be subject to supervision by FINMA or super-sro. For distributor and insurance intermediaries, a FSA-type model will be in place approval of individuals as advisors. All issuance of securities (debt or equities) shall be subject to a prospectus stating the terms of the issue, the issuer, the fees and the responsible persons, including all risk factors, etc., available to investors at all times. A Key Investor Document (KID) must also be issued summarizing all terms of the issue available to investors at all times. Continuing Information to be in place relating to product information and valuation. The Prospectus and KID shall be subject to regulatory approval. 10 APRIL

14 FFSA DIRECTIONS OF IMPACT SUPERVISION Requirements for Authorisation Concept of Supervision CROSSBOARDER Conditions for the distribution by foreign service providers and of foreign products in CH FINMA new SRO Organisational Requirements Product Segmentation Production Product Description (Prospectus/KID) Product Information Documentation and Disclosure Formation & Training Code of Conduct KYC and Client Segmentation Conflicts of Interest Service Information Quality Requirements Inducements Transparency of Services and Costs Enforcement of Client Claims 10 APRIL

15 FFSA/CISA RE-ENACTING EU LEGISLATION FFSA/CISA EU What is to come? Supervision MiFID/AIFMD Harmonisation of initial authorisation and operating requirements Organisational Requirements MiFID/MIFIR/ AIFMD Rules on the organisational structure necessary to meet the professional obligations Code of Conduct MiFID/AIFMD Setting a universal Code of Conduct for Financial Service Providers Know-your-Customer MiFID Client Classification (Retail / Professional); Suitability and Appropriateness test Product Information Prospectus Directive/ AIFMD Rules on the layout and content of Prospectusesand KID s / Offering Memorandum an Supplements Service Information MiFID Best Execution : to obtain the best possible result for the client Transparency of Services and Costs Documentation and Disclosure MiFID/AIFMD MiFID/AIFMD Transparency and Disclosure Requirements with view to Services and Service Providers Conflicts of Interest MiFID/AIFMD Management of Conflicts of Interest and conflicts policy Inducements MiFID/AIFMD Regulation of the acceptance of Inducements through inducement/ remuneration Policies Formation & Training MiFID Requirement of continuing Formation and Training of Service Providers Cross-Boarder Activities MiFID/AIFMD Regulates the activity of foreign financial service providers. Keyword: Equivalence 10 APRIL

16 MIFID II FUTURE CHANGES Regulation of new trading activities, strategies, technologies products and systems; Balance the Level playing field for market participants; Improving Investor Protection; Improved Pre-trade and Post-trade Transparency; Regulation of OTC Derivatives and Dark Pools; Transaction Reporting and Market Data Consolidation; Improved Interventionist powers for European and National Regulators (Keyword: Sanctions). 10 APRIL

17 FFSA TIMETABLE June/July 2014 end 2014 Phase I Phase II Phase III Phase IV The Federal Council commissions the Federal Department of Finance together with the Federal Department for Police and Justice and FINMA to take up the work on the new legislative project; The project group publishes their hearing report on the Federal Financial Services Act (FFSA) which illustrates the key thrusts for the new legislation. Interested parties are invited to comment on the hearing report until 28 March By mid- 2014, a consultation draft of the law ( Vernehmlassungsvorlage ) shall be presented to the Federal Council. Consultation Process: The draft law goes to the cantons, political parties, associations and other interest groups for consultation. 10 APRIL

18 lecocqassociate KEY CONTACT Please contact Dominique Lecocq for any questions at or lecocqassociate is a boutique law firm with offices in Switzerland, Malta, the United Arab Emirates, and New York (2014) specialized in selected few niche practice areas, including regulatory banking, collective investments, corporate finance, regulatory insurance, islamic finance and private equity. Disclaimer: The information contained herein is for informational purposes only and is not meant to serve and should not be relied upon as professional advice. Further information on the subject matter of this publication may be obtained from lecocqassociate. 10 APRIL