Update Legal & Regulations
The Swiss Financial Services Act (FinSA) and the Swiss Financial Institutions Act (FinIA) were passed by Parliament on 15 June 2018. The associated draft ordinances prepared by the State Secretariat for International Finance (SIF) were submitted to the Federal Council, which completed its hearings of the wording of the ordnances on 6 February 2019. The SSPA prepared a statement and presented this to the Federal Department of Finance for assessment. In its view, the draft FinSA Ordinance submitted to the hearing is positive – including the specific provisions to improve legal security for an attractive Swiss financial centre. In certain areas, however, changes need to be made. The key issues are:
- Art. 11 of the draft FinSA Ordinance specifies in excessive detail when a key investor information document is deemed to be available at the financial services provider, and when this is to be made available to an “execution only” client on an exceptional basis. The decisive factor is that this financial services provider should not be obliged to conduct follow-up investigations.
- Art. 63 of the draft FinSA Ordinance aims to establish that the investor is entitled to withdraw his subscription or purchase commitment. This right of withdrawal is granted in place of an extension of the offer period, if pursuant to Art. 56 FinSA a prospectus supplement needs to be prepared because a new circumstance has occurred before the conclusion of the public offering or the opening of trading which could have a material effect on the valuation of the securities offered. The proposed amendments are essentially in line with EU regulations, whereby this establishes only the right of withdrawal or revocation, but not the right to extend the offer.
- The duration of the transitional periods is important, because the final versions of the FinSA and FinIA ordinances are likely to be published only towards the end of 2019. In order to give issuers sufficient time to prepare for the transition to the FinSA regime – this applies in particular to the prospectus and the key investor information document – all transitional periods need to be extended from one to two years. Alternatively, of course, the date on which the FinSA and FinIA come into force could be postponed by one year. This is unlikely to be politically opportune, however.
- Lastly, the transitional regime for structured products with reference to the prospectus and the key investor information document needs to be clarified with the effect that during the transitional period, in the case of a public offering of structured products, no issue prospectus pursuant to the Swiss Code of Obligations needs to be prepared, but that instead a simplified prospectus must continue to be prepared.
Further aspects were taken up not merely by the SSPA, but also by other circles involved in the hearing. Topics discussed were the concept of financial services (no extension to include the brokering of financial instruments), advertising (no ban on advertising) and the exception of making the key investor information document available to absentees in advance when providing advice (no restriction to technical impossibility).
The SIF will evaluate the hearings and will submit revised draft ordinances to the Economic Commissions of both Councils for consultation (planned for the summer of 2019). Approval by the Federal Council is scheduled for the autumn of 2019, while the legislation is set to come into force on 1 January 2020.
In addition to a FinSA Q&A, the SSPA is planning to develop standards for certain sections of the key investor information document and basic prospectus.
ESA consultation concerning PRIIPs RTS adjustments
At the beginning of February, the European Supervisory Authorities (ESA) published their final report on the consultation concerning adjustments to PRIIPs RTS. Conclusion: it is too soon to make material amendments to PRIIPs RTS. Instead, implementation of PRIIPs regulations will continue to be pursued in 2019, and the statements gathered during the course of the consultation will continue to be analysed.
Product intervention in the EU
The European Securities and Markets Authority (“ESMA”) has extended its temporary ban on binary options and contracts for differences (“CFDs”) for small investors by a further three months from 02 October 2018 and 01 November 2018 respectively. At the national level, the Financial Conduct Authority (FCA) and BaFin, amongst others, are preparing themselves for the end of ESMA’s product intervention measures. Both authorities have launched or held consultation processes on the planned restrictions. While BaFin is sticking closely to ESMA’s product intervention measures, the FCA seems to be going further. The EUSIPA has prepared a document that addresses the central concerns of the structured products industry in conjunction with the planned national intervention measures, and can be used by national associations within the context of consultation processes.