With this informative note, Banque Cramer & Cie SA would like to present you with the main principles of the Swiss Financial Services Act.
Purpose of the FinSA
The Financial Services Act (FinSA) and its implementing ordinance (FSO) came into force on 1 January 2020. Nevertheless, a number of important provisions were granted a transitional period of up to two years. The full effect of this Act will therefore be seen as of 1 January 2022. However, all financial service providers must implement the FinSA starting on 1 January 2020. They have to comply with certain obligations according to the deadlines, although no later than 1 January 2022.
The purpose of this notice is to inform you of the main provisions affecting your relationship with the Bank and the financial transactions you carry out in your account.
The main objectives of the FinSA are to protect the clients’ interests of financial institutions, to establish comparable conditions for providing financial services, and to strengthen the reputation and competitiveness of the Swiss financial centre.
It thus determines the criteria for a fair, diligent, and transparent provision of financial services by financial institutions and regulates the offering of financial products.
Financial services and instruments
The FinSA applies whenever the Bank provides certain services in financial instruments on behalf of its clients. A distinction must therefore be made between the financial services provided and the financial instruments covered by these services.
Financial instruments and the following services provided to clients
- Buying and selling financial instruments;
- The reception and transmission of orders relating to financial instruments;
- Asset management and management of financial instruments;
- Issuance of personalised recommendations relating to transactions in financial instruments (investment advisory services);
- Granting of lombard loans to execute transactions in financial instruments.
Main financial instruments
- Equity securities, including shares, participation certificates, and dividend coupons;
- Debt securities and bonds;
- Units in collective investment schemes;
- Derivatives and structured instruments.
In order to provide adequate safeguards, financial intermediaries must classify their clients into one of the following three categories:
- Private Client;
- Professional Client;
- Institutional Client.
The private client enjoys the highest level of protection and the institutional client receives the lowest level of protection.
The rules of conduct to be applied by financial intermediaries will thus vary and adapt according to this classification.
Description of the client classification categories
Clients considered non-professional and non-institutional
Public law institutions operating a professional cash management system
Pension institutions or institutions for occupational pension purposes having an occupational cash management system
Companies with a professional cash management system
Large companies i.e. those exceeding two of the following values: balance sheet total of CHF 20 million, revenue of CHF 40 million, or equity capital of CHF 2 million.
Private investment structures having a professional cash management set up for high net worth clients
Financial intermediaries within the meaning of the Swiss Federal Banking Act, the Financial Institutions Act (FinIA), and the Collective Investment Schemes Act (CISA)
Insurance undertakings subject to the Insurance Supervision Act (ISA)
Foreign clients subject to prudential supervision in the same way as the above-mentioned financial intermediaries and insurance companies
National and supranational institutions under public law operating a professional cash management system
Specific case of the Collective Investment Schemes Act (CISA)
Professional and institutional clients are considered qualified investors under the CISA.
Private clients with discretionary management mandates or long-term investment advisory mandates are also considered qualified investors under the CISA.
Clients can change their classification. Indeed, if they meet certain eligibility criteria, wealthy private clients can declare they wish to be considered as professional clients (opting-out). They can thus benefit from a lower level of protection, under the following conditions:
The client has available liquid assets of at least CHF 2 million;
The client has available assets of at least CHF 500,000 and an educational background and professional training or equivalent experience in the financial sector. This experience enables them to demonstrate that they have the necessary knowledge to understand the risks associated with investments.
Pension funds or institutions for occupational pension provision having a professional cash management system as well as companies with a professional cash management system may declare in writing that they wish to be considered as institutional clients (opting-out).
Conversely, all professional clients can declare in writing that they wish to be considered as private clients (opting-in).
Finally, institutional clients can declare in writing that they wish to be considered as professional clients (opting-in).
Client order execution policy and transparency on risks and costs
One objective of FinSA is to ensure optimal order execution in the trading of financial instruments. Our institution maintains an internal regulatory framework enabling us to take all necessary steps to ensure that the transmission and execution of orders are carried out in accordance with best execution rules. When executing orders, the Bank applies and respects the cardinal principles of good faith and equal treatment.
Furthermore, clients will experience greater transparency as the Bank is presently required to document not only the financial services it offers but also the information it collects regarding its clients. We will also document your needs and the rationale behind each personalised recommendation, including in the form of an advice report. The provision of a basic information sheet or key investor information document (“KIID”) also provides detailed information on the risks and costs for certain financial products.
Nevertheless, trading in financial instruments entails both opportunities and risks. It is therefore essential to understand them prior to purchasing this type of product. The revised brochure “Risks of Trading in Financial Instruments” presents the most important aspects of typical risks. It is available on the Bank’s and the Swiss Bankers Association’s (SBA) website.
Finally, the Bank makes available on its website a document covering all the details necessary to comply with its information obligation.
Verifying appropriateness and adequacy
In the case of advisory mandates taking into account the client’s entire portfolio and discretionary management mandates, the Bank only provides these services if it believes that the client has the experience and knowledge necessary to understand the opportunities and risks. The Bank offers these services if it considers that the transaction carried out within the framework of the financial service provided is appropriate, in light of the client’s financial situation and investment objectives.
In the case of advisory mandates not involving the client’s entire portfolio, the Bank only checks for suitability based on the client’s knowledge and experience.
With regard to executing the client’s orders, the Bank does not carry out any sort of verification.
The Ombudsman is a free and neutral information and mediation body.
Disputes concerning complaints between a client and a financial service provider must be dealt with in a referral procedure by the Swiss Banking Ombudsman, if the client and the Bank are unable to come to an amicable solution in response to the client’s complaint.
Swiss Banking Ombudsman Bahnhofplatz 9
8021 Zurich, Switzerland
Telephone: +41 21 311 29 83