7 September 2020

Sign saying Game Changer Ahead

FINMA approved a register of advisers for the first time on 20 July 2020: the register of advisers of BX Swiss Ltd. Further registers of advisers are expected to be approved in the near future. This blog post discusses the concept of investment advisers as defined in the Financial Services Act (FinSA) and shows how investment advisers have to operate following the approval of the first register of advisers.

The investment adviser as a financial service provider and client adviser

Providing investment advice on a commercial basis constitutes a financial service and is therefore covered by the new FinSA (Art. 3 lit. c and d FinSA). Under the FinSA, investment advisers fall into the client adviser category. Client advisers are natural persons who come into contact with a client of a financial service provider and offer them a specific financial service or perform such a service (e.g. issuing individual investment recommendations or managing assets).

Subject of the investment advice

Art. 3 lit. c no. 4 FinSA provides for a broad legal definition of investment advice. Thus, investment advice is described as "the provision of personal recommendations on transactions with financial instruments". In general, investment advice involves the provision of individual advisory services to clients in the areas of money and capital investment, and the provision of related advice and recommendations.

However, the client adviser does not go so far as to assume responsibility and accountability for the investment decision, which is characteristic of asset management but not of investment advice. To sum it up: The investment adviser advises, but does not implement.

Code of conduct for investment advisers

According to Art. 6 FinSA, client advisers (as mentioned above, this category also includes investment advisers) must now demonstrate appropriate knowledge in order to be able to act for clients of financial service providers. In addition, as financial service providers, they must comply with the code of conduct pursuant to Art. 7 et seqq. FinSA (e.g. informing clients of the name and address of the financial service provider, conducting an appropriateness or suitability test and enter into the register of advisers; for further information see blog post on the Duties of Conduct under the Financial Services Act (FinSA)).

The register of advisers

As a further novelty under the FinSA, investment advisers working in Switzerland – as well as other client advisers - must be entered in a register of advisers, or else they will not be allowed to carry out their activities in Switzerland (see also blog post Client advisors must now be registered). On 20 July 2020, FINMA approved the first register of advisers: the register of advisers of BX Swiss Ltd. Other registers of advisers are likely to follow.

The purpose of this obligation to register is that client advisers are aware of their duties under the FinSA. Furthermore, the client can obtain information about a client adviser by inspecting the register.

The obligation to register also applies to client advisers from abroad who wish to conduct cross-border business in Switzerland. Client advisers who are employed by domestic prudentially supervised financial service providers (e.g. employees of banks and securities firms) are not subject to the registration obligation. Client advisers of foreign financial service providers who are subject to prudential supervision abroad are exempt from the registration obligation pursuant to Art. 31 Financial Services Ordinance (FinSO) if they provide their services in Switzerland exclusively to professional or institutional clients.

Deadlines and requirements for registration

The transitional provisions of the FinSA stipulate that client advisers must register within six months of a registration body being authorized by FINMA. With the approval of the first register of advisers on 20 July 2020, the six-month transitional period ends on 19 January 2021. By this date at the latest, the application for registration in the register of advisers must be submitted. The application for registration with the first approved register of advisers by BX Swiss Ltd. needs to be submitted online.

Requirements for registration

In order for client advisers to be registered, they must provide proof of sufficient knowledge of the code of conduct of the FinSA and of the necessary expertise for their activity, in accordance with Art. 29 para. 1 FinSA. In addition, they must provide evidence of taking out professional indemnity insurance or the existence of an equivalent collateral as well as proof of affiliation to an ombudsman's office.

Whether client advisers possess knowledge of the FinSA code of conduct and the necessary expertise for their activity and whether they are able to provide corresponding evidence, will be assessed when reviewing their application for registration, whereby this review is subject to the discretion of the registration body. In the case of the first authorized registration body BX Swiss Ltd., the following evidence will be taken into account:

  • Diplomas, certificates and attestations of training;
  • Proof of experience in the signed curriculum vitae;
  • Voluntary: written confirmation from the employer that the client adviser has the knowledge in the fields of activity to be registered in accordance with Art. 3 para. c FinSA.

BX Swiss Ltd. as operator of the first approved register of advisors published non-exhaustive lists of accepted training courses.

If the certificates were issued by providers, which the registration body has not yet reviewed (this is probably still the case with a large number of providers), the registration body imposes the following requirements, which are presented here in abbreviated form.

a) Requirements regarding knowledge of the code of conduct

Knowledge of the code of conduct must be proven. The registration body places the following cumulative requirements on such proof:

  • Education and further training must be appropriate (initial training must last at least half a day, further training at least two hours);
  • Proof of participation must be provided (certificate with date of participation, name of the participant, designation of the education or further training and of the institute);
  • Alternatively, a test can be taken, which determines knowledge of the code of conduct, although it is not yet clear which institutions offer a test accepted by the register of advisers.

In terms of content, the registration body places the following requirements in particular on the education or further training or the test to be taken:

  • Knowledge of the code of conduct pursuant to Art. 7 - 19 FinSA as well as the rules on conflicts of interest pursuant to Art. 25 - 27 FinSA, the provisions of the Ordinance and the interpretations existing in practice;
  • Rules regarding registration in the register of advisers.

b) Requirements regarding expertise

Proof of expertise within the meaning of Art. 6 FinSA can be provided by documented participation in education and further training courses and by taking a corresponding test. The registration body requires the following:

  • Education, further training or test content must have a certain scope and be completed with an exam with diploma or certificate;
  • The examination or test is governed by regulations;
  • Education, further training or testing covers specific fields of activity of the client adviser pursuant to Art. 3 lic. c FinSA.

Furthermore, detailed information must be submitted to the registration body, such as details of the training institution, the regular duration of the training or the requirements for participation in the training or test.

Content of the register of advisers

The register of advisers will then contain at least the following information about the investment adviser:

  • Name and first name of the investment adviser;
  • Name or corporate name and address of the financial service provider for which the investment adviser is acting;
  • Function and position of the investment adviser within the organization;
  • Fields of activity of the investment adviser;
  • Completed education and further training of the investment adviser;
  • Ombuds office to which (a) the investment adviser (if he is also a financial service provider) or (b) the financial service provider for which the investment adviser works is affiliated;
  • Date of entry in the register.

If you have any further questions, please contact our Banking & Finance team.

You are currently offline. Some pages or content may fail to load.