Implementation of FinSA and FinIA (part 1): time to sit back and wait?

Following the entry into force of FinSA and FinIA on 1 January 2020, asset managers and trustees were required to report to FINMA by 30 June 2020 and state their intentions on the authorisation process. The next step is to take the necessary measures in order to apply for authorisation from FINMA by the end of 2022.

Although asset managers and trustees have thus cleared the first hurdle imposed by FinSA/FinIA, client advisors should now keep an eye on the deadline of 19 January 2021, which marks the end of their transition period, and submit their application for entry in an advisor register.

Submitting an authorisation application – when does time run out?

Asset managers and trustees must apply to FINMA for authorisation by the end of 2022 and prove that they are affiliated with a supervisory organisation. According to FINMA, as of 30 June 2020, 1,934 asset managers and 272 trustees had expressed an interest in authorisation. Of these, about 12% intend to apply for authorisation this year, and the first asset managers have already received authorisation. Of the rest, 29% plan to apply for authorisation in 2021 and 59% in 2022.

It appears that most asset managers and trustees will only take action to apply for authorisation from mid-2021. Many want to wait and benefit from others’ experiences of the authorisation process. It may make sense not to want to be first in the queue, but it is important to consider that being at the end of the queue when demand is highest is also not ideal. It must also be remembered that new structures (such as governance) must already be in place on submission of the authorisation – timely implementation of FinSA/FinIA requirements is therefore recommended.

Outstanding tasks for asset managers and trustees

Since the next steps for implementation are not yet set in stone, the pressure on asset managers and trustees to act seems to have lifted for now. But appearances can be deceptive – the end of the transition period is not too far away in view of the tasks still to be completed. Important strategic and business decisions will soon have to be made, such as:

  • Given the size of the company, does it make sense to outsource the risk management and compliance roles?
  • Should these roles be independent of profit-oriented positions?
  • Does the company's management meet all the legal business conduct requirements or are personnel changes or reinforcements needed?

As well as answering these questions, client contracts and internal guidelines must be updated in view of the regulatory requirements and changes to processes and conditions. Affiliation with an ombudsman’s office for financial service providers must also be arranged.

None of these tasks can be completed overnight, so it is important to set the right strategic course and use the time available to make operational changes efficiently.

Client advisors – sitting back is not an option

Asset managers and trustees may be able to sit back and enjoy the end of summer this year before returning with fresh impetus to align their company with the new regulatory requirements.

The same cannot be said for client advisors in the financial services sector who are not subject to supervision and provide services in Switzerland. As FINMA approved the first registration body for client advisors on 20 July 2020, the six-month transition period in which to submit an application for entry in a register of advisors will expire on 19 January 2021. Prompt action is advised.