The origins and architecture of FinSA and FinIA

From self-regulation to statute

Until 2019 Swiss law contained no general code of conduct for financial services. The duties of a bank or an asset manager towards its client followed from the law of mandate in Articles 394 et seq. of the Code of Obligations, which requires the agent to perform faithfully and carefully, to render account and to hand over everything received in connection with the mandate. Federal Supreme Court case law developed these duties into a graduated system of information, advice and warning that depended on the type of relationship: execution-only, advisory or discretionary management. The securities dealers’ duties of conduct under the former Stock Exchange Act, the guidelines of the Swiss Bankers Association and the codes of the associations of independent asset managers supplemented the private law. The most visible example of the reach of this private law was the treatment of retrocessions. In two judgments of 30 October 2012, the Federal Supreme Court held that a bank acting as portfolio manager had to account to its client for distribution fees received from fund providers, because such fees created an incentive that could conflict with the client’s interests. The obligation applied even to payments received within the same group and regardless of whether the fees were in line with the market.¹ Once FINMA had required banks to inform their clients of their rights, many institutions paid out considerable sums or negotiated waivers in the following years.

Two developments made legislation unavoidable. The financial crisis of 2008 revealed that retail investors in Switzerland had bought structured products, notably those issued by Lehman Brothers, on the basis of advice whose quality and documentation varied widely. At the same time the European Union was preparing its revised Markets in Financial Instruments Directive (MiFID II), which would condition access to the European market for third-country firms on the equivalence of their home regulation. The Federal Council therefore proposed a comprehensive reform, which it presented to Parliament in a dispatch in November 2015.² The draft originally contemplated a separate supervisory law, reversal of the burden of proof and a special litigation fund for retail clients. Parliament removed the most controversial procedural elements and adopted both Acts on 15 June 2018.³ After two rounds of consultation on the ordinances, the Federal Council decided on 6 November 2019 to bring the Acts into force on 1 January 2020.

The result is a system with two layers. FinSA applies to all financial service providers, whether banks, securities firms, portfolio managers, insurers offering investment products or foreign firms serving Swiss clients. It is a conduct statute that defines financial services, classifies clients and prescribes what must be done in the relationship with each client. FinIA is an authorisation statute. It creates a single hierarchy of licences for portfolio managers, trustees, managers of collective assets, fund management companies and securities firms and determines the organisational and financial requirements that each must meet. Banks remain authorised under the Banking Act, which FinIA does not replace, although the conduct rules of FinSA apply to them in full. The two Acts are completed by the Financial Services Ordinance (FinSO, FIDLEV), the Financial Institutions Ordinance (FinIO, FINIV) and the FINMA Financial Institutions Ordinance, which entered into force on 1 January 2021 after FINMA had adopted it in November 2020.⁴

The legislative technique

The Acts follow the structure of European law in their concepts but not in their density. Where MiFID II and its delegated regulations run to several hundred pages of detailed requirements, FinSA relies on general principles whose content the ordinances and practice fill in. Because the legislature expressly allowed industry self-regulation to specify the rules, the Swiss Bankers Association and the asset management associations issued guidelines on the implementation of FinSA that serve as a standard of reference.⁵ The European model nevertheless left its mark on the terminology. Client segmentation, suitability and appropriateness, the key information document and the prospectus regime all have European counterparts, and Swiss institutions that also operate in the European Union can often use the same processes in both markets.

The choice for a lighter Swiss version of the European model has consequences for practice. Swiss institutions must meet a standard that is recognisably similar to MiFID II, which facilitates their work with European clients and the recognition of their documentation abroad. At the same time, the Swiss rules leave more room for judgement, especially in the treatment of inducements and in the form of documentation. In the relationship with private clients from the European Union, many Zurich banks therefore apply the stricter European standard voluntarily, because a uniform process is less costly than two parallel ones and because foreign law may apply to the client relationship in any event.

Notes

1. CapLaw, “Accounting to Clients for Trailer Fees and Inducements – The Decision of the Swiss Supreme Court 4A_127/2012 and 4A_141/2012 of 30 October 2012 and its Regulatory Consequences”, https://www.caplaw.ch/2012/accounting-to-clients-for-trailer-fees-and-inducements-the-decision-of-the-swiss-supreme-court-4a_1272012-and-4a_1412012-of-30-october-2012-and-its-regulatory-consequences/. The decision rests on Article 400 of the Code of Obligations. FINMA reacted with its Newsletter 41/2012 of 26 November 2012, requiring banks to adjust their practices and inform affected clients. ↩
2. Federal Council, Dispatch on the Financial Services Act (FinSA) and the Financial Institutions Act (FinIA) of 4 November 2015, BBl 2015 8901, as cited in the preamble of the Financial Services Act of 15 June 2018, https://www.lexfind.ch/tolv/207925/de. ↩
3. Bär & Karrer, Peter Hsu, “FinSA: Scope, Client Segmentation And Rules Of Conduct”, Mondaq, 9 November 2018, https://www.mondaq.com/fund-management-reits/753002/finsa-scope-client-segmentation-and-rules-of-conduct. The article summarises the Acts as adopted by Parliament. ↩
4. FINMA, “FINMA adopts regulation implementing FinSA and FinIA”, media release, 12 November 2020, https://www.finma.ch/en/news/2020/11/20201112-medienmitteilung-folgeregulierung-fidleg-finig/. The FINMA ordinance governs, among other things, professional indemnity insurance for portfolio managers and trustees and the calculation of the de minimis thresholds. ↩
5. The Swiss Bankers Association published its “FinSA/FinIA guidelines” and model documents in 2019 and 2020. Self-regulation recognised by FINMA as a minimum standard has a different status from guidelines that merely reflect industry practice. ↩

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.