Position and Status of Securities Firms
The Swiss securities firms represent medium-sized firms offering financial services. Securities firm are like banks and insurance companies, and in contrast to so called independent asset managers directly and fully regulated by the FINMA.
The regulatory status of being a firms dealer allows to perform most of the important services in the financial industry.
According to Swiss legislation, securities firms are allowed to be custodian of cash and security accounts for their clients. However, in contrast to the regulatory status of a bank, securities firms are not allowed to engage in interest difference transactions. The regulatory basis of Swiss securities firms was introduced in the late nineties with the enactment of the Exchange Act. The Banking Act is – with a few exceptions – fully and directly applicable to securities dealers.
- Swiss securities firms must (i) meet bank’s legal adequacy requirements and (ii) have a minimum capital of CHF 1.5 million (approximately € 1.37 million). In contrast to banks, securities firms must also comply with the so-called base requirement, i.e. the capital must amount to a minimum of 25% of the full annual expenditure.
- Client confidentiality of securities firms is identical to the banking secrecy.
- Audits must be conducted by a FINMA approved auditor.
- In addition, securities firms must have an independent internal audit.
- The board exercises only supervising functions and does not interfere with the Management functions of securities firms.
- Finally, Swiss securities firms are part of the Deposit Protection of Banks and Securities Firms.
The enactment of the federal Stock Exchange Act has led to a different perception of firms dealers. Whereas historically, firms dealers have been primarily B-concessionaries or exchange agents, they are nowadays predominantly medium-sized asset managers, sometimes even active in brokerage and investment banking.
In a European context, securities firms are the most regulated investment firms, which are characterized by a minimum capital of € 730,000 (so-called “730K-firms”). In the German implementation these are the “securities trading banks” and “portfolio managers”.