SWITZERLAND Law and Practice Contributed by: Olivier Favre and Tarek Houdrouge, Schellenberg Wittmer Ltd
securities exceeds 25%. Also, ETDs fall into the scope of the transaction reporting obligation, to the extent that the underlyings are securities listed or admitted to trading on a Swiss regulated exchange. Disclosure of Shareholdings Exposures to equities listed on a Swiss regulated exchange resulting from derivatives transactions (including cash-settled derivatives) are counted towards the long and short positions in such equi - ties for the purposes of the disclosure thresholds for significant shareholdings (the lowest threshold being at present 3%). 3.1.6 Business Conduct Any firm that trades in derivatives is subject to the rules of the Swiss derivatives regulation of the FinMIA and the FinMIO and must have a policy in place that specifies how it complies with its regulatory obliga - tions resulting from these rules (see 1.1 Overview of Derivatives Markets ). To the extent that it is a firm subject to prudential supervision, compliance with such rules is reviewed by the regulatory auditors as part of the annual regula - tory audit process. In addition to such process, there are no specific business conduct rules to be taken into account with respect to trading derivatives other than the following. A party engaged in derivatives trading with a Swiss counterparty is subject to business conduct require - ments, to the extent that it not only trades with a coun - terparty in the same way as in the inter-dealer market, but that it establishes a client relationship with the counterparty in the context of trading the derivatives. Derivatives transactions are classified as “financial instruments” under the rules of the FinSA. Any of the following activities would be deemed to give rise to such a client relationship for the purposes of Swiss regulatory requirements and this would also give rise to an activity of providing a “financial service” to the counterparty: • providing brokerage services regarding financial instruments (buying and selling “financial instru -
ments”) and/or receipt and transmission of orders regarding transactions in “financial instruments”; • marketing “financial instruments”; • providing advisory services regarding transactions in “financial instruments” (this would also include corporate finance services provided to a buy-side client); • providing discretionary investment management services regarding a portfolio including “financial instruments”; and • acting as a lender financing transactions in “finan - cial instruments”. As a result of providing such a “financial service”, the FinSA point-of-sale obligations would need to be taken into account, which include the following: • an obligation to classify the counterparty into the categories of: • an obligation to provide information on the financial instruments (including general risk disclosures for trading financial instruments generally and spe - cific disclosures for the products traded), provided that this obligation may be waived by professional clients; • a best execution obligation; • an obligation to register front office staff members with a client adviser registry, unless the financial services provider is already FINMA supervised or, if it is subject to prudential supervision by a foreign regulatory, the Swiss counterparties are only “per se professional clients”; and • a record-keeping and accountability obligation, provided that this obligation may be waived by professional clients. With respect to the obligation to provide information on CFDs, see the proposed new requirements by FINMA as stated in 2.5 Asset Classes . 3.1.7 Commercial End Users Commercial end-users may benefit from certain exemptions from regulatory requirements, to the extent that they are classified as small non-financial (a) professional client; (b) institutional client; or (c) retail client;
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