Switzerland is nowadays viewed as a top-rated financial hub in the whole world. The main reason for that is the stability of its financial market. Swiss jurisdiction is amazingly attractive for investing thanks to the ease of many activities such as creating start-ups, establishing innovative foreign companies or registering SMEs.
This article will be helpful for those considering registering a financial company or planning to gain a license for managing fund assets in Switzerland.
Legislation outline
It is crucial for entrepreneurs looking to launch a financial company in Switzerland to learn about key jurisdiction requirements and main regulative bodies. The two principal legislative authorities in Switzerland are FINMA and SNB.
There is also a new financial regulatory body that has been established recently in Switzerland. The supervisory authority called SO was set up due to the latest changes in the state’s legislation and would be worth familiarizing with for those intending on obtaining a financial provider license.
Licensing process
The procedure of obtaining a financial market operator license in Switzerland starts with filing an application to FINMA. The regulator would only approve the request after inspection shows that the applicant satisfies all the requirements related to finance, staff, and organization.
It is worth taking into account that FINMA only provides license for performing supervisory functions to the company as a legal entity and not to the managers and stakeholders. CIS distributors or investment advisors are not obliged by FinIA to apply for licensing.
Regulatory guidelines
FINMA requires individuals who want to provide financial services to have a financial service provider license. They also must list suitable corporate rules and be organized in a way to be capable of fulfilling their statutory obligations. Qualified participants and individuals responsible for managing financial institutions are expected to have an immaculate track record.
In order to get a permission for performing banking services in Switzerland banks and security dealers are required to provide a guarantee of the sufficient capital and meet the liquidity conditions, that are presented in relevant legislation.
FinIA demands from asset managers and their proxies to conform to the latest conditions of licensing. In Switzerland non-domestic managers and their trustees who are present in Swiss legislation are supposed to obtain an asset manager license. If the company is physically present in Switzerland it needs to register a branch or an office of a foreign country.
Investigation and authority of FINMA
In the case when other market participants like 3rd parties or investors inform FINMA about possible illegal activities, the regulator must inspect the situation and the potential threat. FINMA has multiple administrative tools in its disposal but still does not has the legitimacy to start civil and criminal proceedings.
Penalties from FINMA
By using an extensive range of instruments FINMA ensures that the applying companies comply with the needed legislation and enforces the requirements on them. Here is the list of these tools:
- Precautionary actions: when the market or its participants are at risk FINMA can take precautionary measures to avoid the threat;
- Compliance with the law: on those who violates the law FINMA has a right to impose penalties;
- Declarative verdicts and warnings: FINMA disposes the authority to apply penalties to the license holders who violate the financial legislation;
- Prohibitions and restrictions: violators of supervision legislation can be prevented by FINMA from executing their activities as senior officers for as long as 5 years;
- Stoppage or suspension of operation: when operators do not have a license FINMA can rightfully ban their activities.
Compliance
It is necessary to follow a number of requirements for opening a financial company in Switzerland:
- Organizing risk assessment and preparing a plan to minimize risks;
- Reporting any substantial changes in risk assessment;
- Informing the Board of Directors about results of risk assessment;
- Reporting any significant violations to the Board of Directors.
Interested about potential risks in the financial sector of Switzerland? COREDO is here to provide legal advice.
Actually, Switzerland was once among the first countries to present money laundering regulations and now has extremely strict AML guidelines.
Regulating financial entities
Even though domestic banking and other services in Switzerland are not obliged to apply for a license or registration, non-domestic providers are required to do so. Applicants who originally come from foreign countries but are physically present in Switzerland need to comply with the conditions that are regular for domestic operators.
Regardless of not being a European Union member, Switzerland intends to carry out regulatory framework very similar to the one presented in the EU.
Conclusion
The regulation of financial sector in Switzerland is one of the tightest in the world. The high level of regulation makes Switzerland a very attractive and desirable destination to provide financial services at.
COREDO is prepared to provide you with legal advice on establishing a financial company in Switzerland. Our specialists will help you with legal compliance with European standards and application for a financial operator license in Switzerland.