At the start of January 2020 Switzerland began a new regulatory era with the introduction of the Swiss Financial Institutions Act (FinIA). The grace-period granted to pre-existing asset managers and trustees is almost over, yet less than five percent of External Asset Managers (EAMs) in Switzerland have submitted their applications to the Swiss Financial Market Supervisory Authority (FINMA). Failure to comply with licensing regulation risks both business continuity and reputation.
Given the timeline and complexity of the application process, Julius Baer encourages its intermediary clients to get in touch to look at the options open to them when it comes to preparing the licence application.
Time is of the essence
From 1 January 2023, an existing EAMs without the appropriate FINMA licence will no longer be able to continue managing third-party client assets as they are today. While it’s sufficient for the licensing application to be submitted – but not yet approved – by 31 December 2022, submission is only possible once the relevant supervisory organisation has provided a confirmation of affiliation. In order to meet year-end deadlines, it is suggested that supervisors are approached no later than 30 June 2022.
FINMA expects to receive around 2500 applications in the coming months in total. This high volume of paperwork might lead to delays in terms of responsiveness not only from the supervisory organisations but also from FINMA itself, so it’s wise to initialise the application process now.
Success lies in the preparation
FINMA applies a risk-based approach when assessing the licensing applications. While simple business models are assessed in a standardised form, business models entailing increased or higher risks require further, in-depth examination on factors such as appropriate risk-mitigating measures.
Because there is no one-size-fits-all approach to gaining authorisation, and because there is no clear definition on what an increased risk is, each application must be prepared on a case-by-case basis. Though the application process takes place online, enough time must be allowed to not only prepare the documents required, but to rethink and realign areas of your business that do not yet meet authorisation criteria.
From looking at the authorisations approved to date, there has been some pushback on applications prepared without external support. This has been due to inconsistencies between client-prepared applications and those prepared by expert consultants. Of course, hiring external support adds costs onto the CHF 6,700 FINMA reports as the mean price to date. However, compared with the risk of operating out-of-compliance or having to halt business, it’s wise to consider whether a smoother process is worth paying for given the current time pressure.
No need to go it alone
Regardless of the size or complexity of your business, multiple options exist for support. Julius Baer is connecting its networks of EAMs, matching those who do not wish to submit a solo application with others who are already licensed or planning to be.
No matter where you sit on the business model spectrum, one thing is clear: There’s no time to lose in beginning the application process. Julius Baer has extensive experience in working with and being at the side of intermediaries throughout all stages of their lifecycle. EAMs that have not yet started preparing their submission are invited to reach out to their relationship manager to evaluate the different options available to them, including personal 1:1 calls with licensing experts, offered on a first-come, first-served basis.
When there’s a change in the industry regulation it’s made to strengthen the standards and operating excellence of the Swiss financial sector. Therefore, seeing we collectively benefit from such regulatory advancements, it’s only fitting that we band together to make the process as smooth as possible.