SWITZERLAND Law and Practice Contributed by: Lukas Morscher and Lukas Staub, Lenz & Staehelin
Swiss Financial Services Act, Swiss Financial Institutions Act The Swiss Financial Services Act (FinSA) and Swiss Financial Institutions Act (FinIA) came into force on 1 January 2020. While the purpose of FinIA is to provide a legal framework governing most financial institutions (ie, asset managers, trustees, managers of collective assets, fund managers and securities firms), FinSA regulates financial services in Switzerland, whether provided by a Swiss-based business or on a cross- border basis from Switzerland or to clients in Switzer - land. The rules are largely based on EU directives – the Markets in Financial Instruments Directive (MiFID II), the Prospectus Directive and Packaged Retail Invest - ment and Insurance-Based Products (PRIIPs) – with adjustments tailored to the Swiss market. In a nutshell, with regard to fintech, the current legal framework provides for specific regulatory require - ments for fintech companies that provide financial services in Switzerland, or to Swiss clients (applica - tion of FinSA), or provide asset management services or other regulated services (application of FinIA and its relevant licensing requirements). 2.3 Compensation Models There are no specific rules on the amount of fees that fintech companies may charge their customers. How - ever, Swiss law provides for a number of disclosure obligations in relation to financial service fees, includ - ing the following: • retrocessions, kickbacks, rebates and similar pay - ments or financial benefits need to be disclosed (including payments received from other group companies) prior to entering into a contract/trans - action – the disclosure has to be specific and, where the exact fees cannot be calculated at the outset of the transaction, fee disclosure has to include the relevant percentages and calculation methodologies; • unless a client has specifically and expressly waived its rights, retrocessions, kickbacks and similar payments need to be handed over in full to the customer; and • where a key information document (KID) needs to be prepared and handed over to Swiss private clients (ie, with respect to collective investment
schemes and structured products), a detailed fee disclosure will have to be included in the KID. For the sake of completeness, it should be noted that FinSA also provides for certain rules against abusive conduct by financial service providers (such as third- party distributors of the products) that are relevant in relation to fees. For example, a financial service provider may not invoice a price that differs from the effective execution price when processing client orders. 2.4 Variations Between the Regulation of Fintech and Legacy Players Early on, the Swiss legislator focused on adapting the applicable legal and regulatory framework to the needs of the fintech sector. Three measures were hence introduced in 2019 to Swiss banking legislation aimed at promoting innovation in the financial sector: • any amount of monies can now be held on settle - ment accounts (eg, for crowdfunding projects) for up to 60 days (as opposed to seven days, as was the case previously); • a sandbox has been created where companies can accept public deposits of up to CHF1 million with - out having to apply for a banking or fintech licence, subject to certain conditions, such as disclosures and prohibitions against investing these deposits; and • a separate fintech licence suitable for businesses whose activity involves some form of deposit- taking, but without any lending activities involv - ing maturity transformation (see 2.5 Regulatory Sandbox ). 2.5 Regulatory Sandbox In addition to the regulatory sandbox (see 2.4 Varia- tions Between the Regulation of Fintech and Lega- cy Players ), under the fintech licence, a company is allowed to accept public deposits provided that: • the total amount of deposits does not exceed CHF100 million; • the deposits do not bear interest (or are not other - wise remunerated); and • the deposits are not re-invested by the company (ie, they are not used for on-lending purposes).
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