SWITZERLAND Law and Practice Contributed by: Lukas Morscher, Lukas Staub and Jil Eichenberger, Lenz & Staehelin
ment system), requires approval from the FINMA to outsource essential services like risk manage - ment. If such an outsourcing is proposed by a financial market infrastructure that the Swiss National Bank (the “SNB”) considers to be sys - temically important, the FINMA must consult with the SNB beforehand. When outsourcing an essential service, the financial market infrastructure must: • carefully select, instruct and control the ser - vice provider; • integrate the outsourced service into its inter - nal control system; and • monitor the services rendered by the service provider on an ongoing basis. Reciprocal rights and duties must be set out in a written agreement with the service provider. The financial market infrastructure remains responsi - ble for complying with its obligations under the FMIA. Cross-border outsourcing requires meas - ures to safeguard professional confidentiality and data protection and affected parties must be informed if their data is transferred abroad. The infrastructure, its internal and external audi - tors, the FINMA, and (if systemically important) the SNB must be able to inspect and review the outsourced service. Requirements on Financial Institutions Under the FinIA and its implementing ordinance (the “FinIO”), financial institutions (ie, portfolio managers and trustees not subject to the Out - sourcing Circular as well as managers of collec - tive assets, fund managers and securities firms which are also subject to the Outsourcing Cir - cular) may only delegate tasks to third parties with the necessary skills, experience and author - isations. They must also properly instruct and supervise these third parties. The FINMA may
require that delegating investment decisions to a foreign third party be subject to a co-operation and information exchange agreement with the relevant foreign supervisory authority, especially if mandated by that country’s laws. If a financial institution outsources significant functions, the service provider is subject to information, report - ing, and audit obligations by the FINMA. The liability of financial institutions and their corporate bodies is governed by the CO. If a financial institution outsources a task, it remains liable for any damages caused by the service provider unless it can prove that it exercised due diligence in selecting, instructing and monitor - ing the provider (special rules may apply to fund managers). Requirements on Financial Services Under the Financial Services Act, financial ser - vice providers (including client advisers and pro - viders of financial instruments, ie, much wider than supervised financial institutions) may only delegate tasks to third parties with the neces - sary skills, experience and authorisations. They must carefully instruct and supervise these third parties. If a secondary (sub-contracted) finan - cial services provider performs financial services for the principal’s clients, the principal remains liable for: • the completeness and accuracy of the client information; • fulfilling the duties in relation to the informa - tion; • the adequacy and suitability of the financial services; and • documentation and accountability. If a secondary financial services provider rea - sonably suspects that client information is incor - rect or the principal has not fulfilled its duties, it
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