This news service recently questioned one of the most eminent figures in the Swiss trusts sector about regulatory developments due to take shape next year.

The regulatory world is changing in Switzerland. The Swiss are mindful of how their neighbours in the European Union have been playing a rough game (arguably counterproductively so) over cross-border financial services recently. This, and other issues, means that its regulatory regime must be up to date, rigorous but not oppressive.

As explained here recently, providing cross-border financial services by non-Swiss financial service providers to institutional, professional, or retail clients in Switzerland, as well as creating financial instruments for the Swiss market, will be regulated by the new Swiss Financial Services Act (FinSA). The act is expected to kick in on 1 January 2020. This is only one feature of what’s going on. The trusts and family offices sector in the Alpine state awaits a change to the regulation of these entities. As this publication knows from having attended conferences in the country, this is a big topic because trusts are recognised in Switzerland under international conventions. (Switzerland is not, as readers know, a Common Law jurisdiction.)

Swiss financial services groups have created a working group, the Swiss Supervisory Organisation of Wealth Managers and Trustees, that is dealing with legislators and regulators. This news service recently interviewed David Wiilson, who is partner and attorney at law, a trust and estate practitioner, as well as a leading figure in the Society of Trust and Estate Practitioners. He is in regular contact with policymakers in Bern and the Swiss industry, and talks about SOWT, the new rules, and what practitioners must prepare for.

Please give a general outline of SOWT and why it was formed, when, by whom, and its supporting groups and key individuals.
SOWT is an association which was formed and registered in the Canton of Bern on 6 January, 2016, by a common interest group composed of representatives of the following leading associations in the financial sector: OAR-G (Organisme d’autorégulation des Gérants de Patrimoine), ASG (Association Suisse des Gérants de fortune), STEP (Society of Trust and Estate Practitioners) and SATC (Swiss Association of Trust Companies).

The intent was and remains to merge OARG and ASG into a supervisory body under the authority of FINMA, in accordance with the new law to be enforced on 1 January 2020, relating to the surveillance of financial intermediaries: the Financial Institutions Act (FINLA) (Loi sur les Etablissements Financiers of 15 June 2018 – LEFin). This new, merged body is called SO-FIT - Supervisory Organisation for Financial Intermediaries & Trustees. Although modifications with the Register of Commerce are not yet completed, it was decided to adopt this new name and brand on all advertisement documentation – see http://so-fit.ch.

The persons involved and leading the project are:

-- for OAR-G : Franz de Planta, Philippe Cornebise, Jean -Christophe Oberson, Eric Wagner, Fabio Pellanda and Stiliano Ordolli;
-- for ASG : Serge Pavoncello, Marc Hauser, Patrick Dorner and Alexandre Rabian;
-- for STEP Federation: David Wallace Wilson and Catherine Motamedi; and
-- for SATC : Alexandre von Heeren.

What is SO-FIT’s mission?
SO-FIT embeds the project of building a comprehensive supervisory organisation that is open to financial intermediaries and trustees in Switzerland. Supported by the Association of Swiss Asset Managers (SAAM), L’Organisme d’Autorégulation des Gérants de Patrimoine (OAR-G), the Swiss Association of Trust Companies (SATC) and Society of Trust and Estate Practitioners (STEP), SO-FIT combines many years of expertise and experience in the investment management and trust business and aims at having a nationwide presence and offerings its services in German, French, Italian and English.

Its core values consist in a commitment to a high level of professionalism, while holding the financial intermediaries and trustees it supervises in high esteem; a cooperation with its affiliates based on dialogue, advice and support, all of which are to be pursued with a long-term horizon; delivering quality, integrity, transparency and continuity as hallmarks of its services and commitment; and listening to and connecting people.

Explain what the new regulatory regime in Switzerland is, which entities and organisations will be affected, the purpose of the regulatory changes, and the timeline for the rollout of the new system.
In short, the new regulatory regime affecting financial intermediaries and the services they provide essentially aims at increasing protection for consumers and reinforcing the rules governing the provision of financial services in Switzerland, by:

-- various obligations of disclosure and information on the financial services and products financial organisations intend to offer, the said rules being contained in the new Financial Services Act (FINSA) (Loi sur les Services Financiers of June 15, 2018 – LSFin); and

-- in accordance with the FINLA, a reinforcement of the structure of organisations offering financial services and/or acting as financial intermediaries (notably: minimum share capital of SFr100’000, proper internal organisation and proven professional capacity of directors of such organisations) and the supervision of said organisations by FINMA, via supervisory organisations to be created, thus moving the auto-regulation system presently in force in Switzerland for financial intermediaries (exclusively focused on anti-money laundering provisions) to a more global system of supervision by the Swiss Financial Markets Authority.  

The adoption of those new sets of rules was essentially driven by the intention of the Swiss Legislator to bring the country up to the European MiFID standards (Markets in Financial Instruments Directive (2004/39/EC), applicable across the European Union since November 2007).

The organisations that will be submitted to the new obligations under FINLA are those offering financial advice and/or products, with the notable exception of insurance companies bound by the Insurance Surveillance Act (Loi sur la Surveillance des Assurances – LSA). Those which will be submitted to the FINSA are those who professionally run an activity as asset managers, fund managers, trustees and instruments traders. Obviously, some organisations will be bound by both laws, while other (trustees notably, who usually do not offer financial and investment advice and services).

FINLA and FINSA will enter into force on 1 January 2020. From that date on, the rules of FINSA will fully apply and those of FINLA will apply to any new organisation created after that date. As for the organisations already created, they will need to announce that they intend to apply for registration under a supervisory body approved by FINMA, by or before 30 June 2020, and will need to comply with the organisational rules set forth in the FINLA by or before 31 December 2022.

The supervisory bodies, amongst which SO-FIT (being the largest incidentally), are presently preparing their submission for authorisation to FINMA. The deadline for filing their submissions has been set for 31 March 2020, and FINMA will need to confirm approval before 30 June 2020.

What does SOWT SO-FIT hope to be the main consequences of this new regulatory regime in terms of Switzerland's competitiveness as a financial centre, revenues, new business, differentiation from other financial centres, etc?
The financial sector in Switzerland needed to move quickly to the level playing field standards set forth within the MiFID regulation. The FINLA and the FINSA were intended for that purpose.

SO-FIT believes that the reinforcement of the protection of consumers, together with new and increased guaranties of financial solidity, knowledgeability and professionalism of organisations offering financial services or otherwise acting as financial intermediaries, will help maintain the solid reputation of the Swiss financial industry.

While there is a risk of consolidation amongst the actors concerned, this will also create new opportunities to welcome clients seeking larger advisory firms and solidly implemented organisations.

Switzerland has been known for the quality of its services and its reputation remains. But there is no doubt that the reinforcement of the rules protecting consumers and guaranties of the solidity of its financial service providers is a must in a world of increased competition and globalisation.