Category Archives: Regulatory

New Regulatory Guidelines on Corporate Governance for Banks, Securities Dealers and Financial Groups/Conglomerates (FINMA Circular 2017/1)

On 1 November 2016, FINMA published its new circular 2017/1 on “Corporate governance – banks” streamlining the regulatory framework on corporate governance for banks, securities dealers, financial groups and conglomerates by defining partially revised minimum requirements and underlying principles. The new circular consolidates and replaces three former FINMA circulars and addresses the experiences made in the financial crisis as well as the revised international standards. The most significant changes pertain to i) FINMA’s commitment to a more principle based approach and consistent application of the principle of proportionality, ii) the introduction of provisions for the audit and risk committee of the governing body as well as iii) the possibility to delegate the internal audit function to another unregulated group company, provided such group company fulfills certain minimum requirements regarding capabilities and resources. The new circular will enter into force on 1 July 2017.

By Peter Ch. Hsu / Sandro Fehlmann (Reference: CapLaw-2017-17)

Stay Recognition Clauses in Financial Contracts

On 16 March 2017, the Swiss Financial Market Supervisory Authority FINMA (FINMA) released final rules on stay recognition clauses in financial contracts that are governed by non-Swiss law and/or subject to the jurisdiction of non-Swiss courts. The new rules are set out in an amendment to the Ordinance of FINMA on the Insolvency of Banks and Securities Dealers (BIO-FINMA) and aim to implement and further specify the scope of the obligation for banks to include stay recognition clauses in financial contracts as provided for in article 12(2bis) of the Ordinance on Banks and Savings Institutions (FBO). The final rules took effect on 1 April 2017, with a 12 months implementation period for contracts with banks and securities dealers and an 18 months implementation period for contracts with all other counterparties.

By Stefan Kramer / Andreas Josuran (Reference: CapLaw-2017-18)

Bail-in Recognition Clause

This paper intents to outline the purpose and scope of article 55 of the European Bank Resolution and Recovery Directive, to present, as an example, the Bail-In Recognition Clause suggested by the Loan Market Association, and to discuss the legal nature of such a clause in a Swiss law governed agreement or document.

By Rashid Bahar (Bär & Karrer), Jürg Frick (Homburger), Theodor Härtsch (Walder Wyss), Marco Häusermann (Niederer Kraft & Frey), Patrick Hünerwadel (Lenz & Staehelin), Stefan Kramer (Homburger), Patrick Schleiffer (Lenz & Staehelin), Bertrand Schott (Niederer Kraft & Frey), Roland Truffer (Bär & Karrer) and Lukas Wyss (Walder Wyss (Reference: CapLaw-2016-44)

Revisited Notification Duty for Voting Rights Delegated on a Discretionary Basis

Practical problems arising from the present notification duty for voting rights delegated on a discretionary basis caused FINMA to consult on a revision of this rule. If implemented, those persons who actually decide on how delegated voting rights are exercised will be subject to the notification duty and no longer the persons controlling either directly or indirectly a relevant legal entity to which voting rights were so delegated on a discretionary basis.

By Benjamin Leisinger (Reference: CapLaw-2016-45)

FINMA Revisits Corporate Governance Guidelines for Banks

On 1 November 2016, the Swiss Financial Market Supervisory Authority FINMA (FINMA) announced its publication of a new circular relating to the supervisory requirements for banks, specifically with regards to corporate governance, internal control systems and risk management. At the same time, FINMA published amendments to existing circulars in relation to remuneration schemes and operational risks for institutions. These combined new and modified requirements incorporate the latest international corporate governance standards as well as post-financial crisis risk management conclusions.

By Philippe Weber / Christina Del Vecchio (Reference: CapLaw-2016-46)

A (Legal) Perspective on Blockchain

Before the background of the growing importance of financial technologies (FinTech), blockchain technology is gaining more and more of the public spotlight. Given that the existing legal framework has been designed for the traditional financial services industry rather than for technology-based business models, both regulators and legislators are facing the challenge of potentially adapting the existing regulation to the new needs of blockchain providers. In this context, a number of related regulatory and legal issues may arise; they are summarized in a nutshell in the present article.

By Luca Bianchi / Edi Bollinger (Reference: CapLaw-2016-47)

The Regulation of FinTech (Startups)

Financial technologies (FinTech) are in the process of becoming the next chapter of Swiss financial market regulation. The rapid growth of the Swiss FinTech ecosystem, the public spotlight, and the changing perception on the importance and the future prospects of innovative business models in the financial industry have triggered a number of interesting regulatory developments. Currently, the center of the attention lies on FinTech startups. Some startups may have the potential to become serious competitors for traditional financial services providers. This article aims to set out the current state and the ongoing progress concerning FinTech related regulatory aspects.

By Luca Bianchi (Reference: CapLaw-2016-31)

ESMA Issues Positive Advice on the Extension of the AIFMD Marketing Passport to Swiss AIFM and AIF

On July 19, 2016, the European Securities and Markets Authority (“ESMA”) published its revised advice to the European Parliament, the European Council, and the European Commission on the extension of the AIFMD marketing and management passport (“AIFMD Passport”) to certain non-EU alternative investment fund managers (“AIFM”) and alternative investment funds (“AIF”). With respect to Switzerland, ESMA confirmed its earlier positive advice and concluded that that there are no significant obstacles impeding the potential application of the AIFMD Passport to Switzerland. While this positive advice is an important step towards passporting for non-EU AIFM and AIF, it is now up to the European institutions (Parliament, Council, and Commission) to decide, based on ESMA’s advice, whether or not the AIFMD Passport will be extended to third-countries such as Switzerland.

By Patrick Schärli (Reference: CapLaw-2016-32)

U.S. Federal Reserve to Enforce U.S. Bank Resolution Regimes on Cross-Border Financial Contracts, Requiring Counterparties to Relinquish Default Rights

In May 2016, the Board of Governors of the U.S. Federal Reserve System proposed new rules that, if adopted, will constitute a significant shift in the terms of financial contracts such as over-the-counter derivatives, repurchase agreement and securities lending transactions. Under the proposed rules, these qualified financial contracts would have to conform with U.S. special resolution regimes. This would require institutional investors, hedge funds and other market participants to relinquish cross-default rights, including in contracts governed by foreign law, entered into with a foreign party, or for which collateral is held outside the U.S.

The International Swaps and Derivatives Association simultaneously released its ISDA Resolution Stay Jurisdictional Modular Protocol which seeks to allow market participants to comply with the proposed rules in the U.S. and similar rules in other jurisdictions.

In this contribution, we provide a brief overview of these proposals which, if adopted, will significantly affect the terms of many financial transactions.

By Thomas Werlen / Jonas Hertner (Reference: CapLaw-2016-33)

Revised Rules on Anti-Bribery and Corruption Law – Increased Duties for Companies and Their Boards of Directors

On 1 July 2016 revised rules on anti-bribery and corruption law entered into force. The revisions aim at improving the basis to combat corruption in the business sector (so-called private sector bribery). Notably, individuals and companies may be punished cumulatively. Under the new rules, companies and their boards of directors should take appropriate internal measures to prevent private sector bribery.

By Tino Gaberthüel (Reference: CapLaw-2016-24)