The Swiss Federal Council has introduced a regulatory system for the trust sector, setting 1 January 2020 as the commencement date of the Financial Services Act and the Financial Institutions Act into national Swiss legislation.
According to Fabianne de Vos Burchart, a Solicitor in Geneva for the Centre for Banking and Financial Law (CDBF); the new ordinances mark ‘the beginning of a new era’ for trustees active in Switzerland, which will bring about ‘profound changes in the industry’.
The most relevant regime for trustees have been set out by the Swiss Federal Council in the following updated documents:
The Financial Institutions Ordinance (FinIO)
The Financial Services Ordinance (FinSO).
The law firm says that the original proposals to regulate trustees caused some disquiet, with many professionals fearing that the Swiss legislature did not understand the nature of trust relationships and would regard trustees as just another type of asset manager.
However, the legislation also brings new improvements in the ordinances:
An exemption from licensing has been created for private trust companies,
An exemption covering various types of single-family office structures has been created.
Educational & professional experience requirements to be members of a trust’s senior management have been adapted to reflect EU standards.
The legislation recognises trustees do not provide financial services and should not act upon the instructions of clients.
A 2 year allowance period is being granted as a blanket exemption in order to give trustees time to comply, as well as allowing FINMA (the Financial Market Supervisory Authority in Switzerland) to set up organisations to regulate the activities carried out by portfolio managers and trustees. FINMA has started working on the guidelines they will be required to apply, in particular with respect to the risk categorisation of the soon-to-be licensed entities.
Both Swiss trustees and foreign trustees residing in Switzerland will have to apply for approval during this timeframe. The regime will introduce additional compliance costs for trustees, and Ms de Vos Burchart predicts that ‘nominees and signatories may disappear as a result, with other companies joining forces with one another to reach a size allowing them to cover their costs.’