Overview of the various authorizations / licenses under finig since 1 january 2020

The new Financial Institutions Act (FINIG) has been in force since 1 January 2020. Together with the Financial Institutions Ordinance (FINIV), FINIG regulates financial institutions’ licensing requirements and organizational requirements. The new law consolidates a wide range of enactments into one law. Securities Houses (formerly Securities dealers), trustees, fund management companies, asset managers of collective investments, asset managers in occupational pension schemes, and independent asset managers are now subject to FINIG. The activities of these financial service providers are explained below.

Securities Houses are natural and legal persons as well as partnerships that (a) trade in securities in their own name for the account of clients; (b) trade in securities for their own account on a short-term basis, are mainly active on the financial market and thereby either could endanger the functioning of the financial market or are active as a member of a trading venue; or (c) trade in securities for their own account on a short-term basis and publicly quote prices for individual securities on a continuous basis or upon request (market makers).

Trustees are persons who, based on the deed of creation of a trust, professionally manage or dispose of special assets for the benefit of the beneficiaries or a specific purpose.

The fund management company manages the investment fund for the account of the investors and decides in particular on the investments.

An asset manager is a person who, based on a mandate, can professionally dispose of the assets of his clients in the name of and for the account of his clients.

Most of the financial service providers mentioned were regulated in separate laws before FINIG came into force. The main changes in authorizations and licenses introduced by FINIG are explained below.

• FINIG created a clear authorization cascade adapted to the activities of financial institutions. According to this cascade, licenses of a higher level always include licenses for activities that are lower down the cascade. However, this does not exempt the licensee from obligations that an activity at a lower level entails. The financial institution is merely relieved of the burden of obtaining an additional license. The following diagram shows the hierarchy of the cascade order.
• The licensing requirement provided for in FINIG applies to:
  • asset managers,
  • trustees,
  • managers of collective assets, which include managers of collective investment schemes on the one hand and managers of pension assets on the other,
  • fund management companies, and
  • investment firms.

If a financial institution carries out several of these activities, it is defined by its typical business activity. Typical business activity is defined as the main business of the financial service provider.

• Independent asset managers are subject to state supervision under the FINIG (see below). The activity of independent asset managers is defined by the objectivity of their strategies. Independent asset managers are natural persons or legal entities that acquire products from other financial service providers to manage assets in accordance with the client’s needs. This applies to asset managers of pension funds and asset managers of individual assets.
• The FINIG provides for supervision by new supervisory organizations. More precisely, asset managers and trustees authorized by FINMA are not supervised by FINMA. Instead, a separate supervisory organization will supervise them. The new supervisory organizations (AO) require a license from FINMA under the Financial Market Supervision Act to carry out their supervisory activities under financial market law and implement their legal mandate. The law and ordinance define the requirements for an AO. AOs are thus private undertakings that assume a performance mandate.