Financial services
⚡TL;DR
- Financial services are services related to financial instruments, which include shares, bonds, and derivatives, but not currencies.
- Cryptocurrencies can either be qualified as a financial instrument or as a currency. BTC and ETH, for example, qualify as currencies.
- If you're a service provider, you might have to get a license granted by FINMA to be able to offer your services. Assess early in your journey whether such a license is required.
If you are a financial services provider (according to the above definition), you become potentially subject to various laws such as the Financial Services Act (FSA), the Financial Institutions Act (FIA), the Financial Infrastructure Act (FMIA), and even the Banking Act (BA). This qualification means that you might have to be granted a license by the FINMA to provide your services. The first thing to do is assess your obligations and understand if you can leverage some of the applicable exceptions to remain outside of the FINMA license scope while providing your services.
Here's an overview of the different scopes of these laws:
Additionally, there are two important things to keep in mind:
- There's a backward compatibility, meaning, for example, that a bank may also be a portfolio manager.
Financial Services Act (FinSA)
If you are only subject to the FSA, there's no formal license to be obtained from FINMA. You have to register and might have to issue a prospectus to offer equity.
Financial Institutions Act (FinIA)
If you become subject to the FIA, you need to obtain a formal license from FINMA for the services you provide; this can notably be wealth, fund, or portfolio management or a company dealing securities for others.
This means that you must apply, and FINMA must formally authorize you to provide your services.
Financial Infrastructure Act (FinMIA)
The FMIA applies to regulated exchanges like SIX or the Bern exchange. It is likely not relevant for your company.
Banking Act (BA)
The next big step is the banking act. This is the biggest license in Switzerland.
Technically, banks receive short-term loans from their customers (e.g., money deposited in your account) and grant long-term loans to their customers (e.g., to buy a house).
The main risk for banks is that all customers withdraw their money as this would impeach the bank to give long-term loans. Because of this risk, the BA has a (very) broad definition that states that an institution is subject to the BA if a company accepts deposits from the public, i.e., from more than 20 persons, or publicly advertises this activity. In other words, the BA is applicable if more than 20 people would lose their money if this institution went bankrupt. However, there are some exceptions:
- 60 days rule: if the money of a given person is kept by the company for less than 60 days, this person doesn't count in the 20-people limit.
- Up to CHF 1 million: If the total amount of money that might be lost is lower than CHF 1 million, the company is not subject to the BA. In such cases, it must, however, be disclosed that the deposit insurance scheme of the FINMA doesn't apply, meaning that this money might actually be lost and will not be covered by FINMA if the company goes bankrupt.
- Up to CHF 3'000 per user: If the deposited amount per user is less than CHF 3'000, these users don't count in the 20-people limit.
Best practices
Sector-specific regulations: The applicable regulatory framework and its impact on the business plan are fully understood and a conscious decision on how to approach regulation is taken.
Assess early in your entrepreneurial journey whether your envisioned business will be subject to a license. This can be a major roadblock. However, if the "problem" is known early enough, you can design your services in a way that you can avoid the license requirements, or you can build your company in a compliant way.
Check out our FinReg packages and book a free call with us to understand how we can support you.