29 Jan 2020 The Structured Products Law Review: Switzerland
The turnover of structured products issued or distributed by major financial institutions negotiated on the national and international markets amounts to 82 billion Swiss francs, and there are currently around 12,000 structured products in Switzerland tradable at SIX Swiss Exchange. This exceptional diversity makes it difficult for investors to compare products, which can lead to inappropriate investments due to misinformation.
Following the entry into force of the EU Prospectus Directive, MiFID II and PRIIPs regulations, and to harmonise the Swiss regulatory landscape with international standards, including OECD guidelines, Switzerland is currently in the process of revising its entire financial regulatory regulation. The Upper Chamber of the Swiss Federal Assembly approved, as a plenum in its 2016 winter session, draft acts for the Financial Services Act (FinSA) and the Financial Institution Act (FinIA). FinSA contains rules of conduct that financial service providers must observe with respect to their clients, including in respect of structured products. FinIA standardises the authorisations for financial service providers, including securities and issuing houses.
On 1 January 2020, both acts (New Regulation) will enter into force. Thus, we primarily analyse structured products in Switzerland under the New Regulation in this chapter.
Switzerland has so far been a playground with a light financial regulation of certain financial sectors such as asset management and advisory services, the distribution of products (with the exception of funds, which are over-regulated) and foreign advisers. There is currently no clear obligation to inquire about a client’s knowledge and experience before entering into a transaction or to warn them of the risks arising from an inappropriate transaction. The New Regulation will address most of these concerns and codify some of the existing practice.
Unlike investment funds, structured products are not subject to a regulatory licence upon issuance: it is securities/issuing houses that are subject to regulatory approval and supervision. Disclosure rules are newly defined in the New Regulation. A distributor of structured products will be subject to a new requirement of being listed in an advisers register under the New Regulation. Foreign distributors will also need to register.
The Swiss regulatory system around structured products is further developed in this chapter.