SWITZERLAND Law and Practice Contributed by: Lukas Morscher and Lukas Staub, Lenz & Staehelin
reviewed annually, the criteria necessary for the exe - cution of client orders. This includes the price, costs, timeliness and probability of execution and settle - ment. Upon the request of the client, the financial ser - vice provider evidences that the respective customer trades have been executed in compliance with these criteria. Regulatory best execution requirements do not apply in relation to institutional clients. 4. Online Lenders 4.1 Differences in the Business or Regulation of Fiat Currency Loans Provided to Different Entities Crowdlending refers to loans for funding companies or individuals, which are consequently categorised as borrowed capital. Crowdlending is also known as P2P or social lending because funding is provided by individuals or companies that are not financial insti - tutions or financial intermediaries. Referring to the distinguishing criterion mentioned in the foregoing to differentiate subtypes of crowdfunding, participants (funding providers) receive a payment in return for making their funding available to the project developer (borrower), typically in the form of interest, although participating loans or bond/note issuances are also possible. The amount of interest or return payment varies depending on the risk of the project and bor - rower, but it is usually lower than what traditional banks charge. There are a number of crowdlending businesses in Switzerland that offer loans to both pri - vate persons and companies. Generally, crowdlending is subject to general financial services regulation, including AMLA (see 2.2 Regula- tory Regime ). Also, under the Swiss Consumer Credit Act (CCA), only authorised lenders can provide con - sumer loans. Lenders need to register with the Swiss canton where they are established or, if activities are conducted on a cross-border basis by foreign lenders, with the Swiss canton where they intend to perform their services. Certain amendments to the consumer credit legisla - tion came into force on 1 April 2019. Consumer loans that are obtained through a crowdlending platform are required to comply with the same consumer protec -
tion provided by the law as if they were extended by a professional lender. Certain implementing provisions in the Consumer Credit Ordinance have also been adopted, such as access to consumer credit infor - mation systems and professional indemnity insurance requirements for crowdlending platforms. 4.2 Underwriting Processes Concerning underwriting processes, see 4.1 Differ - ences in the Business or Regulation of Loans Pro- vided to Different Entities . 4.3 Sources of Funds for Fiat Currency Loans Concerning the syndication of fiat currency loans, see 4.1 Differences in the Business or Regulation of Loans Provided to Different Entities . 4.4 Syndication of Fiat Currency Loans With regard to loans and loan syndication, it is pre - dominantly banks that are active in the relevant mar - ket in Switzerland. There are a number of reasons for this, with one being the Swiss tax law rules commonly referred to as the “Swiss non-bank rules”. The basis for these rules is that, under Swiss domestic tax law, payments by a Swiss borrower under bilateral or syn - dicated financing are generally not subject to Swiss withholding tax. This, however, requires compliance with Swiss non-bank rules. In a nutshell, these rules require that: • a syndicate does not consist of more than ten lenders that are not licensed as banks, if there is a Swiss obligor (the ten non-bank rule); • a Swiss obligor does not, in aggregate (ie, not on a transaction-specific level), have more than 20 lend - ers that are not licensed as banks (the 20 non-bank rule); and • a Swiss obligor does not, in aggregate (ie, not on a transaction-specific level), have more than 100 creditors not licensed as banks under financings that qualify as deposits within the meaning of the relevant rules (the 100 non-bank rule). To ensure compliance with the Swiss non-bank rules, a number of provisions are included in facility agree - ments with Swiss borrowers, guarantors or security providers. Depending on the structure, these include assignment and transfer restrictions that limit the abil -
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