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FinSA FinIA

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[accordion-item title=”What is the FinIA?”]

The FinIA is the Swiss federal Financial Institutions Act, which defines the conditions for licensing companies to operate in the financial sector in Switzerland. It is applicable in particular to independent asset managers, trustees and trade assayers. It contains mainly provisions governing organisation and capitalisation.

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[accordion-item title=”What is the FinSA?”]

The FinSA is the Swiss federal Financial Services Act, which precisely defines the professional rules applicable between financial service providers and their customers. It is applicable in particular to independent asset managers. As a matter of principle, it is not applicable to the business activity of trustee.

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[accordion-item title=”What equity capital should a financial institution (independent asset manager and trustee) have at its disposal?”]

The financial institution must have a share capital of at least CHF 100,000 and its total equity and reserves (share capital and other equity-equivalent funds) must account for at least one quarter of its annual operating budget.

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[accordion-item title=”Is third-party liability insurance indispensable for financial institutions (independent asset managers and trustees) ?”]

Such insurance is not required by law.

It should be noted that if it exists, it can be partially offset against the amount of equity required. However, OSIF recommends that financial institutions take out such insurance.

OSIF will examine with various insurers the best offers in terms of cost and quality that can be made to financial institutions.

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[accordion-item title=”Where can I find the applicable legal texts ?”]

The texts can be found in the volumes containing legislation. OSIF has published a Digest classified by topics which can be downloaded free of charge from the website www.osif.ch.

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[accordion-item title=”What are the main requirements of the Financial Services Act ?”]

The Financial Services Act, which concerns independent asset managers, not trustees, lays down a number of principles which, for the most part, already correspond to good professional practice: customer profile, “appropriateness” and “suitability” of the services and products provided to customers, duty of information, accountability, transparency about commissions received, avoidance of conflicts of interest, adequate organisation, business continuity management, guarantee of faultless management by all the key people who belong to the organisation, choice and adequate supervision of delegates, audit of financial statements, etc.. These various points will be the subject of prudential supervision, as will the anti-money laundering rules.

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OSIF

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[accordion-item title=”What is OSIF ?”]

OSIF is an association organised under Swiss law established at the initiative of ARIF (Association Romande des Intermédiaires Financiers). It is in the public interest and not for profit.

It will apply for approval as a supervisory body within the meaning of the FinIA as soon as the law has come into force on 1 January 2020.

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[accordion-item title=”Who make up OSIF’s bodies ?”]

They are high-level professionals in the field of financial services, the trust industry, financial services law or wealth-management professionals. They are under an obligation to be independent of the institutions subject to the supervisory body.  OSIF’s bodies must have received the approval of FINMA.

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[accordion-item title=”Do financial institutions become members of OSIF ?”]

No, FINMA is opposed to this. Membership of a supervisory body will be via a supervisory contract between the financial institution and OSIF, which will define the rights and obligations.

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[accordion-item title=”Can OSIF impose sanctions on me ?”]

No. OSIF cannot impose financial penalties or revoke the license to practice. Such measures are the exclusive responsibility of FINMA.

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[accordion-item title=”What is the role of OSIF ?”]

OSIF will be a supervisory body that will verify compliance with financial market laws (in particular compliance with the FinIA, FinSA and MLA) by the reporting institutions. It will have the authority to order any expedient supervisory measures. It will also have the function of reporting immediately to FINMA on any difficulties encountered in the course of its work, and of drawing up supervisory reports in accordance with FINMA’s formal and substantive requirements.

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[accordion-item title=”How many financial institutions will join OSIF ?”]

Currently, the Association Romande des Intermédiaires Financiers, which instigated the establishment of OSIF, has many members who will have to be subject to a supervisory body. In addition, there are more than 3,000 institutions in Switzerland that may have to join a supervisory body. OSIF will ensure that it provides a high-quality, competitive service offering so as to attract as many reporting institutions as possible.

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[accordion-item title=”How many supervisory bodies will there be ?”]

The law does not set a maximum number. Currently there are only four serious candidates – including OSIF – for approval as a supervisory body.

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[accordion-item title=”Does OSIF have a good chance of being approved as a supervisory body ?”]

Yes. OSIF has been working for two years to obtain approval and is in permanent touch with FINMA. Its financing is guaranteed, and will be provided partly by an initial endowment from the Association Romande des Intermédiaires Financiers. In its early days, OSIF will rely on ARIF’s personnel and equipment structure in order to minimise its costs. FINMA has not raised any objections or created any obstacles to the establishment of OSIF.

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[accordion-item title=”When will OSIF obtain approval as a supervisory body ?”]

OSIF submitted its application for approval on 16 January 2020. FINMA has a period of six months to rule on this application. In view of the fact that the OSIF dossier was prepared before the law came into force, it is possible that it will be approved before the end of June 2020.

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[accordion-item title=”What advantages does OSIF have compared to the other supervisory bodies ?”]

OSIF will be the only supervisory body based mainly in French-speaking Switzerland. It will therefore maintain a relationship with the financial institutions in this region based on proximity, language and market knowledge. OSIF is being established on the existing basis of the Association Romande des Intermédiaires Financiers. ARIF is respected by the authorities and has loyal members, who know it provides an excellent service. OSIF will benefit from ARIF’s structures and financial support, which will enable it to minimise its costs.

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[accordion-item title=”How much will membership of OSIF cost ?”]

For new reporting institutions a fee will be charged for examining the application to obtain supervised-institution status and the various formalities to be completed in this connection.

No flat-rate fee for supervised-institution status will be charged to ARIF members and non-members who will join OSIF quickly, that is, by 31 December 2021.

After that, there will be an annual supervision fee for all, and fees for the various services actually provided.

Finally, FINMA will charge a fee for examining the application for an operating license, which will only be able to be filed once the candidate is subject to supervision by the SB.

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[accordion-item title=”Are there any costs to be foreseen other than those of OSIF ?”]

Yes. Membership of a mediation body will need to be added and, above all, the cost of the prudential audit by the approved auditor selected by the financial institution.

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[accordion-item title=”Will OSIF cost more or less than the other supervisory bodies ?”]

No more, no less. OSIF will align its fees with those of the other supervisory bodies. The cost structure of the supervisory bodies will result from the requirements of the law and FINMA, and these do not allow the SBs to compete with each other on the basis of “low cost” offers. Since the requirements will be the same for all supervisory bodies, their operating costs will tend to be identical.

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[accordion-item title=”How dependent will OSIF be on the financial institutions ?”]

Not at all. This is strictly prohibited by law and FINMA’s instructions. In practice, all the OSIF bodies will have to prove their overall independence from the supervised financial institutions. The natural persons who make up its strategic board of directors will, at least for the most part, be independent; the persons who make up its operational management will be totally independent. OSIF is not dependent on any professional or political organisation and does not depend on any external financial support, except that of ARIF for the establishment of OSIF.

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[accordion-item title=”Is it fair that ARIF is providing the initial endowment needed to establish OSIF ?”]

It’s perfectly fair considering that ARIF’s financial reserves have been formed by its members’ membership fees and by the remuneration of its services. However, more than half of these members are financial institutions, independent asset managers or trustees, which must from now on be subject to OSIF, and will migrate to it.

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[accordion-item title=”What will happen to ARIF ?”]

ARIF will continue to exist as a MLA SRO for financial intermediaries that are not subject to the FinIA.

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[accordion-item title=”Where are OSIF’s offices located ?”]

OSIF’s offices will be located at the same address as those of ARIF, whose premises it will share.

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[accordion-item title=”When, at the earliest, can I join OSIF ?”]

Financial institutions will be able to join OSIF as soon as it has received its approval. In practice, it is expected that this will be possible as from 1 July 2020.

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[accordion-item title=”Is it in my interests to join OSIF very early on ?”]

Yes, quite clearly. First, because it’s mandatory for wealth managers to comply with the FinSA in order to be able to obtain membership of the SB, and to apply for the FINMA operating license. They must therefore prepare ahead of time in order to comply with the transitional provisions of the FinSA. Secondly, because ARIF members who apply for membership of OSIF quickly will benefit from preferential financial terms as a supervised institution. The companies that have obtained a license will also have a competitive advantage in the eyes of the market, clients and banks.

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[accordion-item title=”What is the latest practical deadline for joining OSIF ?”]

For existing wealth managers and trustees, the latest date in theory is 31 December 2022. It should nevertheless be recalled that if these future reporting institutions have to file their license application to FINMA by no later than 31 December 2022, they must beforehand obtain their reporting institution status from their supervisory body. So it’s impossible to wait until the last moment to apply to be subject to OSIF supervision, given that the application file requires a certain amount of time to be processed – in some cases additional information or a preliminary interview. From a practical point of view, it would be very unwise to wait until any later than 30 June 2022.

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Auditors

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[accordion-item title=”What is a prudential audit?”]

A prudential audit is the audit that the supervisory body, or an auditor approved by it, will carry out to check that the financial institution meets the conditions laid down by the FinIA, and the FinSA, if applicable to it. Its frequency will be from one to four years, depending on the cases. It will also include the MLA aspects and the financial statements.

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[accordion-item title=”Which auditor can be used?”]

The auditors and lead auditors will have to be approved by the supervisory body. This approval will be granted to auditing firms that apply for it under the conditions provided for by law, in particular with regard to competency, in-service training, independence and guarantee of faultless management.

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[accordion-item title=”Who will appoint the auditor ?”]

The auditor will be appointed by the financial institution that will have selected it from among the approved auditors, at the institution’s expense. It will also be possible for the supervisory body to appoint an auditor, at the member’s expense, for specific audits.

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[accordion-item title=”Will I be able to keep my statutory auditor ?”]

Your statutory auditor will be able to function as a prudential auditor if he/she is approved. You will also be able to keep your statutory auditor even if he or she does not perform the prudential audit; however, this will result in an additional cost, as the financial statements will also have to be audited during the prudential audit.

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[accordion-item title=”What will be the cost of the prudential audit ?”]

The cost of the prudential audit will be freely negotiated between the financial institution and its auditor. It will depend on the volume of work to be done, having regard to the size of the company, its operations and its clientele. No tariff is imposed by the supervisory body.

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Mediation

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[accordion-item title=”What is a mediation body ?”]

A mediation body is a private office dedicated to attempting out-of-court mediation in the event of a dispute between a financial institution and one of its clients.

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[accordion-item title=”Why do I have to join a mediation body ?”]

It is required by law.

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[accordion-item title=”How much will it cost to be affiliated to a mediation body ?”]

No costs have yet been determined. There will be annual membership fees and fees in the event of recourse to the mediation body, which must be paid by the financial institution.

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[accordion-item title=”Which mediation body can I join ?”]

There is no approved mediation body yet. This approval will be granted after the law comes into force, probably in 2020. If no mediation body is approved, the Federal Department of Finance will appoint a state office for this task. As soon as a mediation body has been approved, financial institutions will have a maximum period of six months to join it.

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[accordion-item title=”Who can establish a mediation body ?”]

Any candidate that has the financial and organisational capabilities and is independent of financial institutions may apply to become a mediation body. It is likely that there will be several of them.

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[accordion-item title=”When do I have to join a mediation body ?”]

Financial institutions will have six months to join a mediation body from the time at which there is at least one.

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[accordion-item title=”Will OSIF be able to act as a mediation body ?”]

No. Mediation bodies must be completely independent.

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[accordion-item title=”Will OSIF require membership of a particular mediation body ?”]

No. Financial institutions will be free to choose their mediation body from among those that will be approved. However, OSIF will negotiate favourable terms with one or more mediation bodies for financial institutions that will be subject to OSIF.

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Trustees

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[accordion-item title=”What are the advantages of joining OSIF for a trustee ?”]

OSIF has been established by ARIF, Association Romande des Intermédiaires Financiers. ARIF has a large number of trustees among its members, which it has been supervising for more than 20 years. ARIF has an excellent knowledge of this industry. It is, moreover, the only SRO to have issued a specialised MLA directive for trusts and other similar entities. ARIF is also in the process of drafting a code of conduct for trustees which they will be able to comply with voluntarily. ARIF and OSIF routinely work in the English language. OSIF is therefore a good choice for trustees and provides an alternative to other bodies.

[/accordion-item]
[accordion-item title=”What is the code of conduct for trustees ?”]

The trustees’ code of conduct is a document drawn up by ARIF after consultation with professionals in the sector, whether or not they are members of ARIF, and several high-level specialists. Its aim is to lay down good conduct rules for trustees in Switzerland which will serve as a guideline for them in establishing their own internal directives, and to prove to their clients or Swiss or foreign authorities that their business activity is regulated. The code of conduct is still being drawn up so as to take into account as many opinions as possible.

[/accordion-item]
[accordion-item title=”Why did you choose to draw up a code of ethics on trusts ?”]

The trustees’ market requested that such a code of ethics be drawn up. ARIF considered it expedient to meet this request and to allow the sector’s professionals to define the terms of self-regulation, so as to avoid having this regulation imposed on them by law or, if such regulation is imposed one day, to already define its standards in advance.

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[accordion-item title=”Will it be mandatory to be subject to the trustees’ code of conduct ?”]

No, it will be optional to be subject to the trustees’ code of conduct.

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Training

[accordion-item title=”What training will be required of professionals ?”]

All higher-education courses (universities, federal diplomas, equivalent foreign diplomas) as well as Swiss or foreign certificates of proficiency in the field of financial services or, as applicable, in that of trusts, may be taken into account. A case-by-case examination will also be conducted and will depend on the match between the training undergone and the financial services actually offered by the institution. Account will, in addition, be taken of work experience.

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[accordion-item title=”What work experience will be required of professionals ?”]

The experience required will, in principle and according to the FinIA, be at least five years in the area of wealth management or trusts. A weigh-up will be conducted, which will examine in particular the match between this experience and the financial services actually offered by the financial institution.

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[accordion-item title=”Which professionals will be subject to specific training or experience ?”]

They will be the people involved in the management of the financial institution. At least two of these people must satisfy these training and experience requirements. In special cases, particularly very small structures, at least one person must meet this requirement.

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[accordion-item title=”Will OSIF take part in the training ?”]

No. The Ordinance on supervisory bodies does not grant it this option.

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[accordion-item title=”If OSIF does not provide any training, who will ?”]

Financial institutions and their staff will be able to choose freely from among the many training offers available on the market. Among them, we note in particular the training run by the Institute for Studies in Finance and Banking (ISFB), which provides all the training necessary for CWMA certification, and which is approved for the organisation of the certification examinations (even if the training was undergone elsewhere). ARIF will continue to provide MLA training and will organise seminars on the other regulatory requirements (in particular FinIA, OFinI, FinSA, OFinS).

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[accordion-item title=”What is CWMA training ?”]

CWMA (Certified Wealth Management Advisor) training is a training course and a certification programme established in Switzerland by a standard-setting organisation approved by SECO (State Secretariat for Economic Affairs), known as SAQ. It comprises on-request training modules, which are defined after a preliminary positioning test of the candidate, followed by a certification examination.

The CWMA certification also provides for in-service training. It’s the training and certification model that has been adopted by most of the banking institutions in Switzerland for their own staff.

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[accordion-item title=”Will OSIF require financial institutions’ staff to have obtained CWMA certification ?”]

No, it’s an option. However, this certification will in any case be deemed sufficient by OSIF.

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[accordion-item title=”Why have ARIF and OSIF chosen to encourage CWMA training ?”]

The CWMA training is currently the “standard” in the Swiss banking industry for professionals working in banks. Considering that many independent asset managers come from banks, many of them have already completed this training. Until now, CWMA certification was exclusively reserved for banks’ staff. ARIF managed to persuade SAQ to open up this certification to independent asset managers, so that they can prove they have the same level of training as their bank employee colleagues. ARIF and OSIF feel that the banks’ prudential approach to external asset managers will lead them to require the latter to have training at least equivalent to that of their own employees.

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[accordion-item title=”What is the cost of CWMA training ?”]

A complete one-year CWMA training course costs about CHF 6,000.-. However, most professionals do not need to attend this complete course, and will have the choice of taking part only in the modules that appear to be necessary for their training after a positioning test (mock exam).

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[accordion-item title=”Is it necessary for me to complete my training ?”]

The necessary training, combined with experience, depends on the type of financial services provided. A good way to test your wealth management skills is to take the CWMA positioning exam organised by ISFB.

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[accordion-item title=”Will I have to, and will I be able to, continue to attend ARIF’s MLA training ?”]

MLA training for financial institutions will be integrated into the OSIF requirements. In practice, it will continue to be provided by ARIF, as it is at the moment. The same will apply to training in the rules of the FinIA and the FinSA.

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[accordion-item title=”Will ARIF provide training to the supervised financial institutions ?”]

ARIF will provide them with training in MLA matters as well as in other regulatory requirements (in particular FinIA, OFinI, FinSA, OFinS).

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FINMA license

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[accordion-item title=”When can I file my license application to FINMA ?”]

For existing wealth managers and trustees as at 31 December 2019, the latest deadline for filing a license application to FINMA is 31 December 2022. However, the license application may only be filed after having obtained supervised-institution status with the supervisory body.

Once the license application has been filed to FINMA, financial institutions may continue their business activity until FINMA has taken a decision.

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[accordion-item title=”When do I have to file my license application to FINMA if I start work as a wealth manager or trustee in the course of 2020 ?”]

A financial institution that commences its business activity during 2020 must file its license application with FINMA within one year of receiving approval from its supervisory body, that is, probably no later than 30 June 2021. It may continue its business activity until FINMA has taken a decision.

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[accordion-item title=”What about financial institutions established from 1 January 2021 onwards ?”]

These financial institutions may only start their business activity once they have obtained an operating license from FINMA.

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[accordion-item title=”Will the information collected by ARIF on its members over the years be used for the membership application and the license application to FINMA ?”]

Yes. This information and these documents may be used as long as they are up to date, which will facilitate regulation. Some of them will have to be renewed, such as criminal records or the CVs of people who were hired a long time ago.

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[accordion-item title=”Will OSIF answer questions from financial institutions that are in the process of applying for their license from FINMA ?”]

Yes. OSIF will answer questions from future supervised institutions that are preparing their application file, which will, in principle, be the same to become an OSIF-supervised institution as for the required FINMA license. Once OSIF has been approved by FINMA, it will also be able to issue interpretative circulars to provide guidance to supervised institutions.

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[accordion-item title=”Do I have to change SRO and leave ARIF ?”]

ARIF will continue its duties as a self-regulatory organisation for financial intermediaries not subject to the FinIA.

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[accordion-item title=”What should DUFIs (financial intermediaries directly regulated by FINMA) do ?”]

FINMA’s supervision of DUFIs will cease on 31 December 2019. DUFIs not subject to the FinIA will have to join an SRO by 31 December 2020. DUFIs that are financial institutions subject to the FinIA will have to join an SRO or apply to be supervised by OSIF and file their license application with FINMA by 31 December 2020.

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[accordion-item title=”Do precious metal assayers have to join a supervisory body ?”]

As the law stands at the moment, yes. However, precious metals assayers have persuaded the Federal Department of Finance to have draft amendments to the FinIA submitted to Parliament, so that they are fully subject solely to the supervision of the Federal Central Office for Precious Metals Control. If this change is made before the end of 2020, precious metal assayers will be completely taken out of the FinIA and SRO system.

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Client advisers’ register

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[accordion-item title=”What is the client advisers’ register ?”]

The client advisers’ register will list all natural persons providing financial services without being employed by an authorised financial institution within the meaning of the FinIA. This refers in particular to dedicated investment advisers, fund distributors and service providers operating from abroad. Registration requires information to be provided that is substantially identical to that of the staff of financial institutions.

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[accordion-item title=”Will ARIF keep a register of advisers ?”]

ARIF is currently preparing its application for approval to perform this advisers’ register function.

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[accordion-item title=”How much will it cost to enrol in the client advisers’ register ?”]

The legal provisions provide for a cost ranging from CHF 500.- to CHF 2,500.-. The cost structure will be adapted according to the work to be done. It should be noted that since this activity will be entrusted to ARIF, the latter will benefit from the existing database of persons subject to registration under the MLA.

This will simplify the procedure. An update will be necessary, however.

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[accordion-item title=”Will registration of the advisers subject to registration result in subsequent monitoring, and will that registration need to be renewed ?”]

It is possible that an ongoing updating mechanism may be put in place at FINMA’s request, but without prudential supervision.

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Please feel free to send us all your questions, big or small, and we will be pleased to answer them and include those of general interest in this list. Don’t forget to consult the OSIF website regularly as well at www.osif.ch.

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