The Financial Services Act in private banking practice

Client segmentation

FinSA divides clients into three segments. Retail clients, called private clients in the Swiss terminology, receive the full protection of the Act. Professional clients include financial intermediaries, regulated insurers, central banks, public entities and pension schemes with professional treasury operations, and large companies that exceed two of three thresholds: a balance sheet total of CHF 20 million, turnover of CHF 40 million or equity of CHF 2 million. Institutional clients form a subset of professional clients that includes banks, securities firms, fund management companies and supranational entities.¹ The segmentation determines which rules of conduct apply. Most duties of information, appropriateness, suitability and documentation protect retail clients only. The prospectus exemptions of the capital markets part of the Act also depend on the segment.

For private banking, the most important provision is the possibility of opting out. High-net-worth retail clients and private investment structures created for them may declare that they wish to be treated as professional clients. A client qualifies if he can credibly show that he possesses, directly or indirectly, eligible financial assets of at least CHF 500,000 together with the knowledge needed to understand the risks of investments on the basis of personal training or professional experience, or financial assets of at least CHF 2 million without any further condition. Real estate and pension assets do not count towards these thresholds. Professional clients may in turn declare that they wish to be treated as institutional clients, while institutional and professional clients may opt in to the higher level of protection.² Opting out has practical attractions for wealthy clients, since it gives access to products that may not be offered to retail clients and reduces the paperwork of each transaction. It also reduces the protection that the Act provides. A declaration obtained without proper explanation of its consequences exposes the provider to the risk that a court will disregard it.

Clients whose portfolio is managed on a discretionary basis or who receive long-term advisory services occupy a special position. Under FinSA, retail clients with a portfolio management or long-term advisory relationship with a prudentially supervised institution are deemed qualified investors under the Collective Investment Schemes Act, unless they declare that they do not wish to be so treated.³ This rule allows discretionary managers to invest client money in funds reserved for qualified investors, including Swiss limited qualified investor funds and foreign funds not approved for distribution to retail investors. For independent managers, the rule is one of the main practical benefits of the licence, since before 2020 the mandate of an unsupervised manager did not confer this status on the client.

Information, appropriateness and suitability

The core of FinSA consists of the rules of conduct in Articles 7 to 20. Financial service providers must inform their clients about their name and address, their field of activity and supervisory status, the possibility of initiating mediation proceedings before an ombudsman, the general risks associated with financial instruments, the financial service recommended and its risks and costs, and any economic ties with third parties in connection with the service.⁴ The Swiss Bankers Association publishes a brochure on the risks of trading in financial instruments that most banks hand to their clients to satisfy part of this duty. The information may be given in standardised form, on paper or electronically, before the contract is concluded or the service is provided.

The Act then distinguishes between three types of service. When a provider gives advice on individual transactions without taking the whole portfolio into account, it must verify appropriateness, that is, whether the client has the knowledge and experience to understand the product. When it gives advice taking the client’s portfolio into account or manages assets on a discretionary basis, it must verify suitability, which requires it to ascertain also the client’s financial circumstances and investment objectives. Execution-only transactions initiated by the client require neither assessment, although the client must be told that no check will be carried out.⁵ If the provider lacks sufficient information to make the assessment, or considers a product inappropriate or unsuitable, it must warn the client before providing the service. In practice these rules have led banks and independent managers to formalise their client profiles, to introduce investment policies with defined risk categories and to separate advisory models into distinct contractual types.

The Act left one question open that has occupied the courts since. FinSA does not state expressly whether its rules of conduct create private law duties that clients can enforce in civil proceedings, or whether they are public supervisory law only. Although the Federal Department of Finance presented the rules as supervisory law during the drafting, the prevailing view holds that they influence the content of the private law duties of care and loyalty indirectly, as a standard that courts will take into account when interpreting the contract of mandate.⁶ For Zurich litigators, the practical consequence is that a breach of FinSA does not automatically found a claim for damages, but it makes the breach of the duty of care under Article 398 of the Code of Obligations easier to prove.

Documentation, transparency and inducements

Providers must record the agreed services and the information collected about the client, the suitability or appropriateness assessment, any warning given and the services actually provided. Upon request, they must give the client a copy of the documentation and account for the services, their composition, value and development, and the associated costs.⁷ When executing orders, they must ensure the best possible result in terms of price, timing and quality, a principle known internationally as best execution. The organisational rules require appropriate internal regulations, qualified staff and measures to avoid conflicts of interest, while obliging providers to ensure that third parties to whom they delegate tasks have the necessary qualifications.

The most discussed provision is Article 26 FinSA on compensation from third parties. A provider may accept payments from third parties in connection with a financial service only if it has informed the client expressly in advance and the client has waived the payments, or if it passes them on to the client in full. The information must disclose the type and scope of the compensation, and where the amount cannot be determined in advance, the calculation parameters and ranges.⁸ The rule transferred the private law case law into supervisory law and extended it beyond portfolio management. Because a waiver requires specific information, banks now publish ranges of retrocessions for each product category. Many have moved towards products without inducements, particularly for discretionary mandates, where the risk of conflict is greatest. The Federal Supreme Court continued to refine the civil law position after 2020, including for execution-only relationships.⁹

Prospectus and key information document

FinSA also created a uniform Swiss prospectus regime for the public offering of securities and the admission of securities to trading. Since the beginning of December 2020, prospectuses have required the approval of a review body authorised by FINMA before a public offer.¹⁰ The capital market dimension of this regime is treated in the chapter on SIX and the Swiss capital market. For private banking, the more important instrument is the key information document, known in German as the Basisinformationsblatt. Whenever a financial instrument is offered to retail clients, a short standardised document describing the product, its risks and costs must be made available beforehand, unless the product is a simple share or bond or falls under another exemption. For collective investment schemes and structured products that had previously been governed by the Collective Investment Schemes Act, the Federal Council extended the transitional period by one year until 31 December 2022 to align it with the European timetable. Until then, issuers could continue to use the key investor information document or the simplified prospectus of the former regime.¹¹

Since 1 January 2023, two formats have been accepted in Switzerland: the Swiss key information document under FinSA and the Financial Services Ordinance, and the European key information document under the PRIIPs Regulation, which Annex 10 of the Ordinance recognises as equivalent.¹² The acceptance of the European document is an example of the pragmatic equivalence that runs through Swiss financial law. Issuers producing for the European market need not prepare a second document for Switzerland, and Swiss clients receive information in the same format as their European neighbours. In discretionary mandates the key information document need not be provided, because the manager and not the client decides on individual transactions.

The client adviser register and the ombudsman

Two institutional innovations of FinSA affect the market directly. The first is the register of client advisers. Client advisers of Swiss financial service providers that are not prudentially supervised, and client advisers of foreign providers, must be entered in a register kept by a registration body authorised by FINMA before they may serve clients in Switzerland. Foreign providers that are prudentially supervised in their home state are exempt if they serve only professional or institutional clients in Switzerland. Since 1 August 2021, the obligation also applies to the Swiss representative offices of foreign banks serving private clients.¹³ FINMA authorised BX Swiss AG as the first registration body on 20 July 2020 and PolyReg Services GmbH in Zurich as the third on 19 October 2020.¹⁴ Registration requires proof of knowledge of the rules of conduct and of the subject matter, professional indemnity insurance or equivalent security, and affiliation with an ombudsman.

The second innovation is the compulsory affiliation of financial service providers with an ombudsman. Under Articles 74 et seq. FinSA, the Federal Department of Finance recognises ombudsman offices that mediate disputes between clients and providers free of charge or at low cost for the client. The Department had recognised the first offices by June 2020, and providers had to affiliate within six months.¹⁵ The list of recognised offices now includes the Swiss Banking Ombudsman Foundation in Zurich, which banks had created long before FinSA, the Finanzombudsstelle Schweiz (FINOS) and the Ombudsman’s Office for financial service providers in Zurich, OFS Ombud Finance Switzerland in Berne, the Financial Services Ombudsman (FINSOM) in Martigny, the Swiss Arbitration Centre and Terraxis SA in Geneva, together with the Liechtenstein conciliation office for asset managers based there.¹⁶ The concentration of offices in Zurich reflects the concentration of providers. For disputes with banks, the Swiss Banking Ombudsman remains the reference point.

Notes

1. Hsu, “FinSA: Scope, Client Segmentation And Rules Of Conduct” (n. above). The segmentation rules are found in Article 4 FinSA. ↩
2. Hsu, “FinSA: Scope, Client Segmentation And Rules Of Conduct” (n. above). The opting-out and opting-in rules are found in Article 5 FinSA. ↩
3. Art. 10 para. 3ter of the Collective Investment Schemes Act, inserted by the Annex to FinSA with effect from 1 January 2020, bilingual edition, https://www.droit-bilingue.ch/de-fr/9/95/951.31-10-10.html. On collective investment schemes, see the preceding chapter. ↩
4. Hsu, “FinSA: Scope, Client Segmentation And Rules Of Conduct” (n. above). The duties of information are set out in Articles 8 and 9 FinSA and are specified in the Financial Services Ordinance. ↩
5. Hsu, “FinSA: Scope, Client Segmentation And Rules Of Conduct” (n. above). The relevant provisions are Articles 10 to 14 FinSA. ↩
6. Mirjam Eggen (Federal Department of Finance), presentation at a FinSA symposium, 24 September 2014, published by the University of Zurich, describing the rules of conduct as supervisory law with an “Ausstrahlungswirkung auf die privatrechtlichen Rechtsbeziehungen”, https://www.cfmr.uzh.ch/dam/jcr:ffffffff-c9a7-520d-0000-0000271579b2/SymposiumFIDLEGEggenWebsite.pdf. ↩
7. Hsu, “FinSA: Scope, Client Segmentation And Rules Of Conduct” (n. above). The documentation and accountability rules are found in Articles 15 and 16 FinSA. ↩
8. Hsu, “FinSA: Scope, Client Segmentation And Rules Of Conduct” (n. above). The Act thereby codifies the principles developed by the Federal Supreme Court since 2006 and expressly extends the regime beyond discretionary mandates. ↩
9. CapLaw, “Retrocessions and Execution-Only – Recent Developments”, 2024, https://caplaw.ch/2024/retrocessions-and-execution-only-recent-developments/. ↩
10. FINMA, “Preparations for the implementation of the Financial Institutions Act (FinIA) and Financial Services Act (FinSA) are complete”, media release, 28 October 2020, https://www.finma.ch/en/news/2020/10/20201028-mm-finig-fidleg/. FINMA announced that no further applications from supervisory organisations, registration bodies or prospectus review bodies were pending. ↩
11. State Secretariat for International Finance (SIF), “Federal Council extends transitional period for key information document for complex financial instruments”, https://www.sif.admin.ch/en/extends-transitional-period-key-information-document-complex-financial-instruments. The extension required amendments to the Financial Services Ordinance and the Collective Investment Schemes Ordinance. ↩
12. Waystone, “Swiss KIDs and PRIIPs KIDs – latest requirements and deadlines”, https://www.waystone.com/swiss-kids-and-priips-kids-latest-requirements-and-deadlines/. ↩
13. FINMA, “Registration body”, https://www.finma.ch/en/authorisation/registrierungsstelle/. FINMA does not supervise registration bodies on an ongoing basis but may intervene if one fails to meet the requirements. ↩
14. FINMA, media release of 28 October 2020 (n. above). BX Swiss AG’s authorisation is recorded in FINMA’s media release of 7 July 2020 (n. above). ↩
15. Judith Raijmakers, “FinSA: Deadlines for registration with a client advisory registry and affiliation with an ombudsman have been set”, Loyens & Loeff, 8 July 2020, https://www.loyensloeff.com/insights/news--events/news/finsa--deadlines-for-registration-with-a-client-advisory-registry-and-affiliation-with-an-ombudsman-have-been-set/. According to the article, client advisers had to apply for registration by 19 January 2021 and providers had to affiliate with an ombudsman by 23 December 2020. ↩
16. Federal Department of Finance, “Ombudsman according to the FinSA”, https://www.efd.admin.ch/en/ombudsman. The Department warns that only offices listed on its website are officially recognised. ↩

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 September 2025.