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Federal Council wants to reduce barriers to market entry for fintech firms


In its meeting on November 2, 2016 the Federal Council called for an easing of the regulatory framework for providers of innovative financial technologies on the reasons that a dynamic fintech system can contribute significantly to the quality of Switzerland's financial centre and boost its competitiveness as well. The faciliations should especially reduce barriers to market entry for providers in the fintech area and increase legal certainty for the sector overall. The Federal Department of Finance (FDF) has been instructed to prepare a corresponding consultation draft.

The Federal Council proposes a three supplementary element approach:

  • The first element affects the extension of the timeframe to 60 days for the holding of money in settlement accounts that are not deposits. This would be relevant for providers of crowdfunding services. This element would not be restricted to fintech companies, and would instead be generally applicable.
  • The second element termed as “innovation area” or “sandbox” shall allow the fintech companies to accept public funds up to a total value of CHF 1 mio. Such activities must be disclosed but do not have to be authorised nor monitored by FINMA. The anti-money laundering provisions are, however, applicable in the case of a “sandbox”.
  • The third element is a new fintech license. This new type of license should be granted by FINMA. For fintech companies which are restricted to the deposit-taking business (acceptance of public funds) and, therefore, do not operate in the lending business with maturity transformation, less stringent regulatory requirements should apply than those for classic banks. Therefore, the involvement in the depositor protection system is not required. The public funds accepted by fintech companies may not exceed the overall value of CHF 100 mio., as long as the protection of the individual client is guaranteed by special conditions. In the latter case, FINMA can authorise a higher threshold. The minimum capital should amount to 5% of the accepted public funds, but no less than CHF 300,000.

Until the beginning of 2017, the FDF has to draw up a consultation draft with the required legislative amendments. Moreover, it should conduct additional clarifications in cooperation with the interested authorities on reducing further barriers to market entry for fintech firms, also those outside financial market law (e.g. legal treatment of virtual currencies and assets).   LINK

Joint ESMA and EBA Guidelines on the assessment of the suitability of members of the management body and key function holders


On October 28, 2016 the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) launched a consultation on Guidelines on the Assessment of the Suitability of the Members of the Management Body and Key Function Holders.

Weaknesses in corporate governance are widely acknowledged to have been one of the underlying causes of the financial crisis. In order to address those weaknesses, the above authorities have jointly issued these Draft Guidelines in accordance with the new requirements introduced under the Capital Requirements Directive (CRD) and the Markets in Financial Instruments Directive (MiFID II).

The Draft Guidelines:

  • provide common criteria to assess the individual and collective knowledge, skills and experience of members of the management body as well as the good repute, honesty and integrity, and independence of mind of members of the management body;
  • require members of the management body to commit sufficient time to perform their duties and specify how the number of directorships held by members of the management body should be counted, for significant institutions;
  • set out how different aspects of diversity, educational and professional background, age, gender and geographical provenance should be taken into account in the recruitment process; and
  • highlight the importance of induction and training to ensure the initial and ongoing suitability of members of the management body, and call for institutions to establish training policies and to allocate appropriate financial and human resources to induction and training.

The consultation will close on January 28, 2017 and a public hearing in London will take place on 5 January 2017 from 14:00 to 17:00 UK time. National Competent Authorities across the EU will be expected to implement the Guidelines in the middle of 2017.   LINK

EMIR: Adoption of a Delegated Regulation on margin requirements for uncleared derivatives


On October 4, 2016 the European Commission adopted a delegated regulation that specifies how margin should be exchanged for OTC derivatives contracts that are not centrally cleared by a (CCP). The European Commission adopted the draft regulatory technical standards (RTS) submitted jointly by the three European Supervisory Authorities (ESAs: ESMA, EBA, EIOPA) with certain amendments.

For those derivatives not centrally cleared EMIR requires bilateral exchange of collateral to mitigate risks. The European Commission has today adopted a new set of rules, which sets out the levels and types of collateral that OTC derivatives counterparties must exchange bilaterally if the transaction is not cleared through a CCP.

The draft RTS under EMIR were submitted jointly by the ESA’s. The European Commission endorsed these standards with certain amendments, in particular concerning the concentration limits for pension scheme arrangements and the timeline for implementation.

The Delegated Regulation adopted by the European Commission is now subject to an objection period by the European Parliament and the Council after which it will be published in the Official Journal. The implementation of the rules will begin one month after the entry into force of the Delegated Regulation. The initial margin (VM) is therefore expected to come into force by mid-January 2017 and the variation margin (VM) beginning of March 2017.   LINK

Consultation on FINMA's securities trading circulars


The Swiss Financial Market Supervisory Authority FINMA is defining its supervisory practice for the new financial market infrastructure regulation in a number of circulars. It is holding a consultation period for three circulars ending 9 November 2016.

The Financial Market Infrastructure Act (FMIA), the Financial Market Infrastructure Ordinance (FMIO) and the FINMA Financial Market Infrastructure Ordinance (FMIO-FINMA) entered into force on 1 January 2016. These pieces of legislation govern the disclosure requirements for securities transactions and the obligations for operators of organised trading facilities. FINMA's supervisory practice in these areas has now been set out in the following FINMA circulars:

  • Disclosure requirements for securities transactions (revised)   LINK
  • Securities journals (revised)   LINK
  • Organised trading facilities (new)   LINK

ESMA consults on trading obligation for derivatives


The European Securities and Markets Authority (ESMA) has published a discussion paper regarding the trading obligation under the Markets in Financial Instruments Regulation (MiFIR). The trading obligation will move over-the-counter (OTC) trading in liquid derivatives onto organised venues thus increasing market transparency and integrity alike. MiFIR outlines the process for determining which derivatives should be traded on-venue.

The trading obligation under MiFIR is closely linked to the clearing obligation under the European Market Infrastructure Regulation (EMIR). Once a class of derivatives needs to be centrally cleared under EMIR, ESMA must determine whether these derivatives (or a subset of them) should be traded on-venue, meaning on a regulated market (RM), multilateral trading facility (MTF), organised trading facility (OTF) or an equivalent third-country trading venue. MiFIR foresees two tests to determine the trading obligation:

  • The venue test: a class of derivatives must be admitted to trading or traded on at least one admissible trading venue; and
  • The liquidity test: whether a derivative is ‘sufficiently liquid’ and there is sufficient third-party buying and selling interest.

The consultation is open for comments until 21 November 2016. ESMA will use the feedback received to continue working on implementing MiFIR’s trading obligation and potentially draft technical standards specifying which derivatives should be subject to the trading obligation.   LINK

ESMA advises on extension of the AIF passport to 12 non-EU countries


ESMA has published its Advice in relation to the application of the Alternative Investment Fund Managers Directive (AIFMD) passport to non-EU Alternative Investment Fund Managers (AIFMs) and Alternative Investment Funds (AIFs) in twelve countries: Australia, Bermuda, Canada, Cayman Islands, Guernsey, Hong Kong, Japan, Jersey, Isle of Man, Singapore, Switzerland, and the United States.

Within three months of receipt of positive advice from ESMA, the Commission should adopt a delegated act specifying the date when the rules set out in Article 35 and 37 to 41 of the AIFMD become applicable in all Member States. As a consequence, the EU passport would be extended to the respective non-EU AIFs and non-EU AIFMs.

According to ESMA’s advice:

  • There are no significant obstacles impeding the application of the AIFMD passport to Canada, Guernsey, Japan, Jersey and Switzerland
  • If ESMA considers the assessment only in relation to AIFs, there are no significant obstacles impeding the application of the AIFMD passport to AIFs in Hong Kong and Singapore. It was noted however that both HK and SGP facilitate the access of UCITS from only certain EU Member States to retail investors in their territories
  • There are no significant obstacles regarding market disruption and obstacles to competition impeding the application of the AIFMD passport to Australia, provided the Australian Securities and Investment Committee (ASIC) extends to all EU Member States the ‘class order relief’
  • There were no significant obstacles regarding investor protection and the monitoring of systemic risk which would impede the application of the AIFMD passport to the United States (US). However, ESMA considers that in the case of funds marketed by managers to professional investors which do involve a public offering, a potential extension of the AIFMD passport to the US risks an un-level playing field between EU and non-EU AIFMs. ESMA suggests, therefore, that the EU institutions consider options to mitigate this risk
  • For Bermuda and the Cayman Islands, ESMA cannot give definitive Advice with respect to the criteria on investor protection and effectiveness of enforcement since both countries are in the process of implementing new regulatory regimes and the assessment will need to take into account the final rules in place
  • For the Isle of Man ESMA finds that the absence of an AIFMD-like regime makes it difficult to assess whether the investor protection criterion is met

Please find the related ESMA advice following this LINK

ESMA published updated AIFMD and UCITS Q&As


ESMA included one new question and answer on the impact of EMIR on the AIFMD and UCITS framework, regarding the valuation of centrally cleared OTC derivatives by AIF managers and UCITS management companies, respectively.

For OTC financial derivative transactions that are centrally cleared and subject to the reporting obligation of EMIR, can AIFMs/ UCITS management companies rely on the valuation provided by the central counterparty (CCP)?

No. The AIFMD/ UCITS framework requires AIFMs/ UCITS management companies to have in place a process for proper and independent verification of the value of the OTC financial derivative transactions, even if they are centrally cleared. The valuation provided by the CCP can only serve as a point of reference for the verification performed by the AIFM/ UCITS management company. Nevertheless, the AIFM/ UCITS management company should be able to justify any deviation from the valuation provided by the CCP

Please find the full Q&A under the following Links: AIFMD / UCITS


EU regulators hosted workshop on the implementation of the PRIIPs framework


A technical workshop on the implementation of the PRIIPs framework was held on 11 July 2016 in Brussels. The aim of the workshop, hosted by the EU Commission together with the EU Supervisory Agencies (ESAs: ESMA, EBA, EIOPA), was to provide further clarification on the technical standards developed by the ESAs.


Stakeholders had been invited to submit their questions and request for additional guidance in advance. The workshop covered questions regarding the PRIIPs scope as well as the costs, risks and performance sections of the key investor document (KID). The following key points were discussed:


  • Provision of PRIIPs KIDs follows a territoriality principle (EEA investors need a KID irrespective of location of manufacturer)
  • Generally, no grandfathering clause applicable for existing PRIIPs, but commission is working on guidance on which existing products do not need a KID
  • Manufacturer is responsible for the translation of a KID. Official language of country where PRIIP is distributed or additional language as and if defined by regulator to be used
  • No provision of PRIIPs KIDs to retail investors within a discretionary mandate required
  • Floating rate notes or similar (where underlying is a single standard index rate) are not in scope (reasoning: Performance is linear to the reference value)
  • PRIIPs KID perceived as a pre-contractual document, therefore no personalized information on the KID required. KID may be based on an indicative level as long as it highlights the main characteristics of the PRIIP


  • Fund of Funds: Cost look-through for each layer of funds required
  • UCITS as underlying investment of MOPs need to provide PRIIP information. UCITS KIID information not sufficient
  • If no PRIIPs KID information available for underlying investments, estimate of costs should approximate same cost structure to ensure level playing field
  • Negative transaction costs need to be included in calculation of average costs
  • For transaction cost data prior to 31.12.16, no intra-day arrival prices are required. Opening prices (or previous day closing prices) should be used instead
  • No specific thresholds will been defined to determine a significant change in the cost indicator (which would trigger an update of the KID)


  • Voluntary move to highest risk category is not possible. Decision tree for PRIIP categorization and methodology for SRI-calculation to be followed in each case.
  • If the full dataset is available, all five years must be used to calculate the SRI. Otherwise, minimum requirements as stated in the RTS apply.
  • Member states are in charge to define when the complexity label (comprehension alert) needs to be applied. Additional guidance on interdependencies with MiFID II is planned.


  • Payoff graphs for ETDs are still allowed (potential to use payoff graph for specific OTC’s to be discussed in upcoming Q&As)
  • 4th scenario to be used if specific scenarios fall in the tails of the scenario distribution
  • It is allowed to use cash flows instead of payments
  • Entry and exit fees need to be reflected in the performance scenarios
  • Intermediate scenarios for illiquid PRIIPs need to be provided

A webcast of the complete workshop is available on the following link:

The ESA’s highlighted that some opinions presented at the workshop are still in discussion. Official guidance and Q&As was announced to be published in the upcoming weeks.​

PRIIPs – Regulatory technical standards regarding KIDs


The European Commission adopted new rules specifying the content and underlying methodology of the so-called Key Information Document (KID) that will have to be provided to retail investors when they buy certain investment products, as of 31 December 2016

On 30 June 2016 the European Commission adopted a delegated act supplementing the PRIIPs regulation. The delegated act introduces regulatory technical standards (RTS) specifying the content and underlying methodology of the PRIIPs KID.

The RTS specify the exact contents of the KID: it must outline the product's aims, how risky it is, when retail investors can get their money back, how much it costs and its expected returns. All of this information must be set out in a standard way, regardless of the type of investment product. The European Parliament and Council now have a two-month scrutiny period, which they can extend for a further month. LINK

EU Benchmark Regulation entered into force


The Regulation of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds (EU Benchmark Regulation) has been published in the Official Journal of the European Union and enters into force on 30 June 2016.

The EU Benchmark Regulation introduces a common framework to address concerns about the integrity as well as accuracy of benchmarks. The regulatory requirements come through a Regulation, which is directly applicable without requiring national legislation and will restrict the possibility of divergent measures being taken by competent authorities at national level.

The Regulation has the following goals:

  • Enhancing governance and controls over the benchmark process, in particular regarding the prevention of conflicts of interest at the administrator, or at least adequate management of such conflicts
  • Improvement of the quality of input data and methodologies used by administrators of benchmark
  • Assurance that contributors to benchmarks are subject to adequate controls including data
  • Protecting consumers and investors through greater transparency and adequate procedures in regards to correction of wrong data