Where a cross-border financial service takes place

Characteristic performance and the place of the client

Financial regulation in Europe is territorial in principle and functional in application. A licence entitles its holder to carry on business within the territory of the state that grants it, and every state decides for itself which activities count as carried on within its territory. For a bank in Lugano the Swiss answer is simple: the bank holds a licence under the Federal Act on Banks and Savings Banks of 8 November 1934 (Banking Act, BankA, SR 952.0), its organization and its accounts are in Switzerland, and FINMA supervises everything it does, including what it does for clients abroad.¹ Italian law looks at the same relationship from the opposite end. Article 166 TUF penalizes anyone who provides investment services without being authorized under the decree, and Italian practice has long treated a service as provided in Italy when it is directed at a person resident or located in Italy, whatever the place where the provider books the transaction.² The criterion that matters for the Italian supervisor is the place where the client is solicited and receives the service, which for a client living in Como is Como even if the account is in Lugano.

European Union law has adopted the same perspective for third-country firms. Article 42 MiFID II exempts a firm from a third country from the authorization requirements of a Member State only where a client established or situated in the Union "initiates at its own exclusive initiative" the provision of a service. The rule presupposes that every other service to such a client is a service provided in the Union.³ The European Securities and Markets Authority (ESMA) has drawn the consequence that the place of the client, together with the absence of solicitation, decides whether a third-country firm needs a licence in the client's state. The legal fiction that a service rendered from a desk in Lugano is "Swiss" protects the Swiss bank against nothing in Italy. What protects it is either an Italian authorization or proof that the Italian client came of his own accord.

Three legal orders over one relationship

A Swiss relationship with an Italian client is therefore governed by three layers of law that operate simultaneously. The first is Italian supervisory law: the TUF for investment services and the marketing of funds, the TUB for deposit-taking, lending and guarantees, and the secondary rules of the Commissione Nazionale per le Società e la Borsa (CONSOB) and the Banca d'Italia. The second is European Union law, which Italy must apply as a Member State: MiFID II and MiFIR for investment services, the Capital Requirements Directive for banking services, the Alternative Investment Fund Managers Directive (AIFMD) for funds and, for Kryptowerte und Digital Assets, Regulation (EU) 2023/1114 (MiCA). The third is Swiss law, which accompanies the Swiss provider wherever it goes: the Banking Act and its requirement of proper business conduct, the FinSA rules of conduct, the anti-money laundering legislation and the criminal law.⁴

The three layers do not form a hierarchy. Italian law does not defer to Swiss supervision, because no equivalence decision or bilateral agreement obliges it to do so. Swiss law does not exempt a Swiss bank from Italian rules, because FINMA expects supervised institutions to comply with the law of the countries in which they serve clients and treats a breach of foreign supervisory law as a risk to the institution's proper business conduct. European Union law fixes a minimum framework for the third-country firm but leaves most decisions to the Member States, which explains why the answer to the question "may a Swiss bank serve an Italian client?" differs from the answer to the same question for a client in Germany, Austria or France. Italy has exercised its options restrictively, and the Lugano financial centre, whose clients are predominantly Italian, bears the consequences of that choice more than any other Swiss centre.⁵

Notes

1. Federal Act on Banks and Savings Banks of 8 November 1934 (Banking Act, BankA), SR 952.0, Art. 3 para. 2 lit. a (business organization appropriate to the activity) and lit. c (persons entrusted with administration and management of good repute who guarantee proper business conduct), German text at https://www.droit-bilingue.ch/de-fr/9/95/952.0-3-10.html. On FINMA's application of this standard to cross-border business see the section on the Swiss side below. ↩
2. Legislative Decree No. 58 of 24 February 1998 (Testo unico delle disposizioni in materia di intermediazione finanziaria, TUF), Art. 166 para. 1, text at Brocardi.it, https://www.brocardi.it/testo-unico-intermediazione-finanziaria/parte-v/titolo-i/capo-i/ art166.html. The territorial criterion of the place of the client is an inference from Art. 28 and 29-ter TUF and from administrative practice; it is not spelt out in a single provision. ↩
3. Directive 2014/65/EU of 15 May 2014 on markets in financial instruments (MiFID II), Art. 42, quoted in ESMA, Public Statement: ESMA reminds firms of the MiFID II rules on reverse solicitation in the context of the recent end of the UK transition period, ESMA35-43-2509, 13 January 2021, https://www.esma.europa.eu/sites/default/files/library/esma35-43-2509%5Fstatement%5Fon %5Freverse%5Fsolicitation.pdf. ↩
4. For the European instruments see the following section. MiCA is Regulation (EU) 2023/1114 of 31 May 2023; its reverse solicitation clause is Art. 61. ↩
5. Federal Council, Roadmap del 23 febbraio 2015 in materia fiscale e finanziaria tra la Svizzera e l'Italia – Analisi dell'attuazione, report of 27 October 2021, 20–21, https://www.newsd.admin.ch/newsd/message/attachments/68682.pdf. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of August 2025.