Author: Lawyer Enrico Germano
Within the framework of Swiss legislation, an independent supervisory authority for the Swiss financial market was established in 2009 under the name FINMA (acronym for Swiss Financial Market Supervisory Authority), which has sovereign powers over banks, insurance companies, stock exchanges, financial institutions, collective investment schemes, their asset managers and fund managements, as well as insurance intermediaries. With this in mind, FINMA aims to protect creditors, investors and insured persons, as well as to safeguard the functionality of the financial markets. The most important rules and implementing provisions for financial market supervision are contained in the Federal Act on Financial Institutions (Financial Institutions Act, FinIA) and the Federal Act on Financial Services (Financial Services Act, FinSA), both of which came into force on 1 January 2020.
The Financial Services Act excludes the activity of trustees from its scope of application, whereas under the Financial Institutions Act, persons acting in a professional capacity as trustees must obtain authorisation from FINMA and, to this end, must fulfil various financial, organisational and personnel requirements.
Pursuant to Art. 17 para. 2 of the FinIA, a trustee is a person who on a commercial basis manages or holds a separate fund for the benefit of the beneficiaries or for a specified purpose based on the instrument creating a trust within the meaning of the Hague Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition. It should be noted that in Switzerland, the notion of trustee, i.e. any person who, on the basis of the deed establishing a trust, professionally manages separate assets in the interest of a beneficiary or for a specific purpose or disposes of them, is equated with a financial institution within the meaning of Art. 1 of the Trust FinIA. It follows that, as a financial institution, the trustee must necessarily obtain authorisation from FINMA before commencing business activity in a professional capacity.
In order to be authorised by FINMA, trustees must fulfil various conditions for authorisation, in particular they must be legally classified as either a sole proprietorship, a commercial enterprise or a cooperative and entered as such in the commercial register, be suitably organised with adequate risk management and internal controls, have sufficient equity capital or securities, describe their business activity including precise details of their operations and geographic layout in the relevant documents and provide proof of affiliation to an Supervisory Organisation (SO), thus confirming they are supervised by a SO.
It should be noted, however, that such authorisation by FINMA is required for every Swiss financial institution, or alternatively also for every foreign financial institution which employs people in Switzerland who, on a professional and permanent basis and either in or from Switzerland, represent the institution, notably by concluding client mandates on its behalf, promoting the company or for other purposes.
1 The authorisation requirement exists only for trustees who pursue their activities in a professional capacity. By law, trustees conduct their activities in a professional capacity if: they realise gross proceeds in excess of CHF 50,000 during a calendar year; or they enter into or maintain business relationships with more than 20 counterparties during a calendar year that are not limited to the execution of a single transaction; or if they have not become the owner of the assets held in the trust, they have the unlimited power to dispose of third-party assets that at any time exceed CHF 5 million.