FIDLEG – Beyond MiFID II experiences - Banking blog

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Our previous blog on the FIDLEG topic dealt with the genuine connection between Swiss FIDLEG and its EU counterparts (MiFID II or PRIIPs), offering potential synergies in the implementation due to similarities in their objective and scope.

We now focus more specifically on FIDLEG requirements linked to (client) advisory going beyond respective MiFID II requirements or not existing under MiFID II. Ultimately, these insights also set the stage for financial services providers having to define the scope and approach of their implementation of the FIDLEG requirements.

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Advisor Training & Register of Advisors

FIDLEG’s requirements towards advisor training include two core elements. The regulation states that client advisors must have sufficient:

  • Knowledge of FIDLEG’s code of conduct rules
  • Professional expertise and experience given the needs of their area of work

As such, these requirements, which aim at ensuring a certain degree of investment advice quality and ultimately investor protection, are not genuinely new. MiFID II already highlights the importance of ethical business standards and outlines the required expertise of investment advisors especially with regard to sufficient financial product knowledge. Therefore, already available MiFID II trainings could effectively be leveraged to meet the FIDLEG requirements.

However, contextually linked to the advisor training is a new FIDLEG requirement for advisors to register in a “register of advisors”. This registration requirement does not exist under MiFID II. Nevertheless, this requirement is of limited practical relevance since it only applies to client advisors who are not working for entities subject to FINMAG (e.g. banks without subsidiary in Switzerland). To the remaining client advisors, an entry in this register is a mandatory requirement to work as a client advisor in Switzerland, what might be of particular relevance for client advisors of foreign financial services providers that are active in Switzerland on a cross-border basis. Main registration requirements include the adequate education/training, sufficient professional liability insurance coverage and an affiliation with a “mediation body” (advisors can also be affiliated via their employees). Furthermore, the client advisor cannot have entries in the criminal record for offences against assets or criminal convictions according to the Insurance Supervision Act (VAG) or FIDLEG itself as well as no professional ban.

Prospectus

Compared to previous Swiss legislation, FIDLEG stipulates harmonized prospectus requirements for securities offered to the public or at trading venues (with some exceptions). Going forward, financial service providers have to issue a disclosure document describing each eligible security towards potential investors free of charge. This intends to enable clients to make well-founded investment decisions and to compare different financial instruments. In a nutshell, any prospectus has to:

  • Include essential information on the issuer (and any guarantors), securities, risks and the offer for an investment decision
  • Be verified by an independent control body to be authorised by the FINMA
  • Be issued in addition to the basic information sheet

There are some exceptions to this requirement. Notably, securities exclusively offered to professional clients, possessing foreign prospectus according to international standards or information duties of small or medium enterprises with limited presence at capital markets. In addition, a prospectus for funds may not be required by the FINMA if such fund only targets qualified investors. Lastly, should a financial service provider already have fully implemented Regulation (EU) 2017/1129 and thus a foreign prospectus be recognised as an equivalent, efforts in this regard may be substantially lower.

Conclusion

While the Swiss FIDLEG regime mirrors its EU counterpart in many key requirements, challenges will become apparent in the nitty-gritty of complying with and implementing FIDLEG (“the devil is in the detail”). Both legislations are not always identical and FIDLEG includes additional far-reaching requirements. Consequently, the initial focus of any FIDLEG-related activities should be a thorough gap analysis against what has already been implemented for MiFID II.

Nonetheless, FIDLEG also offers compelling opportunities for enhancing operational efficiency, going beyond the mere implementation of regulatory requirements. These opportunities must have a prominent position as you embark on the FIDLEG journey. Stay tuned to read about these opportunities in our upcoming blogs.

 

  Sergio icruz

Sergio Cruz, Partner, Banking Operations Lead

Sergio is a specialist in Operational Transformation in banking with strong expertise in areas such as risk and regulatory driven transformation as well as finance and trading transformation. With over 20 years’ experience in financial services, his focus is on banking operations where he worked on several large assignments in Switzerland and abroad. Key clients include global banks in Switzerland and UK as well as private banks based in Switzerland.

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H. Birkner

Hartmut Birkner, Director, Regulatory Assurance Services

Hartmut is responsible for Deloitte Switzerland’s Regulatory Assurance Services. He has substantial experience working with Swiss and international banking groups and financial services provider. Hartmut has performed MiFID introduction and implementation projects within the investment management industry. He has covered a broad range of topics including the identification of conflicts of interests, licensing and passporting as well as best execution or client order handling questions. His work covered the design and amendment of processes in collaboration with relevant stakeholders as well as drafting internal guidelines.

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Milan

Milan Quastenberg, Senior Consultant, Strategy & Operations

Milan is a Senior Consultant within Deloitte Switzerland’s Strategy and Operations practice. He specialises in project management and operational excellence, especially in the Financial Services industry. Milan successfully planned, managed and delivered major transformation initiatives in several countries.

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Philipp

Dr. Carl Philipp Wagner, Senior Consultant, Strategy & Operations

Philipp is a Senior Consultant within Deloitte Switzerland’s Strategy and Operations practice. He specialises in financial services regulation, organisational transformation, and process excellence. Philipp has managed major regulatory transformation projects, successfully implemented front-end process solutions and process enhancements for client journeys.

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