FINMA Updates January 2024

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The FINMA Guidance report from January, 2024 offers insights into the current status of licensing processes and supervision for portfolio managers and trustees, along with new thresholds for trustees' commercial activity. Below is a breakdown of the key points:

Licensing Process Updates

  • From January 2022 to December 2023, FINMA had received 1,777 license applications, with 1,195 licenses granted.
  • Licensed portfolio managers and trustees, mainly microenterprises (fewer than 3 full-time positions), collectively oversee assets worth around CHF 216 billion.
  • A significant trend observed by FINMA is the delegation of control functions, like risk management and compliance, to external service providers. Despite not directly accrediting them, FINMA evaluates the organizational structures of all authorized institutions, ensuring regulatory compliance and the integrity of Switzerland's financial sector.
  • Institutions can generate a confirmation of the current status of their application on the survey and application platform (EHP) and download this in PDF format. This confirmation acts as proof for business partners that a licence application is being processed by FINMA.
  • Licensed portfolio managers and trustees must promptly report any changes that significantly affect their FINMA license. Changes fall into three categories: those needing no declaration, those declared to the supervisory organization (SO), and those requiring direct authorization from FINMA. Institutions must notify FINMA of authorization-required changes via the EHP platform, following initial SO examination. Upon FINMA's decision, a fee is payable.

Supervisory Measures

  • FINMA initiated 463 investigations regarding suspicions of unauthorized activities as a portfolio manager or trustee since 2020. 234 institutions were put on a warning list for non-compliance and 43 criminal complaints were filed with the Federal Department of Finance.

Thresholds for Trustee Activity

  • Trustees are now required to hold a license if they have unlimited power over trust assets exceeding CHF 5 million. FINMA will contact all the trustees it is aware of who could be affected by this change. Trustees who are uncertain about whether they are subject to FinIA may contact FINMA to obtain clarification.
  • Following a Federal Criminal Court decision, FINMA has revisited the legal status of trustees. FINMA asserts that trustees must be licensed if they exceed certain thresholds, including earning over CHF 50,000 annually from activities or maintaining relationships with more than 20 contractual partners. Additionally, trustees with unlimited control over trust assets exceeding CHF 5 million are also required to be licensed, reflecting the economic separation of trust assets from the trustee's personal assets.
  • Those affected must apply for a license by the end of 2024, requiring prior confirmation of affiliation with a supervisory organization. Institutions are urged to inform FINMA of their licensing obligation by June 2024. FINMA will reach out to potentially affected trustees, and those unsure can seek clarification from FINMA.

Supervision + Supervisory Costs

  • A two-tier supervisory model is in place, with ongoing supervision (such as audits) carried out by supervisory organizations (SOs), and FINMA responsible for approving changes and intensive supervision (including taking enforcement action to impost sanctions and remedial measures to restore compliance

Overall, the guidance emphasizes the importance of timely responses to inquiries, adherence to licensing requirements, and reporting changes that affect license status. It also highlights the need for coordination between FINMA and SOs to ensure effective supervision. Additionally, it outlines the financial implications for supervised entities, including supervisory levies and cost distribution.

Source: FINMA Guidance 01/2024

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