Switzerland overhauls trust sector with new rules
Switzerland will introduce a new regulatory system for the trust sector in January 2020, marking the "beginning of a new era" for trustees active on Swiss soil.
The most relevant regime for trustees is set out in the final version of the Financial Institutions Ordinance (FinIO), adopted this week by the Swiss Federal Council.
Both Swiss trustees and foreign trustees with a presence in Switzerland, will benefit from a three-year transition period to comply with the applicable regulatory requirements and submit an authorisation application.
For trustees active in Switzerland, it marks the beginning of their journey as prudentially regulated financial institutions"
The education and professional experience requirements applicable to members of a trust company's senior management have been adapted and now reflect industry standards.
The Swiss government also made an exemption from licensing for private trust companies, whether they are held in trust, by a foundation or directly by a family member. Also, the fact that trustees do not provide financial services and, as a general rule, do not act upon the instructions of clients has now been recognised.
"For trustees active in Switzerland, it marks the beginning of their journey as prudentially regulated financial institutions," said Fabianne de Vos Burchart TEP, counsel at Charles Russell Speechlys.
The regime will introduce additional compliance costs for trustees, and de Vos Burchart predicts that "certain actors will disappear as a result, whilst others will join forces with one another to reach a critical size that will allow them to cover their costs."
The Swiss Financial Market Supervisory Authority (FINMA) is to set up organisations to supervise the activities carried out by licensed trustees and portfolio managers.
FINMA has started working on the guidelines they will be required to apply, in particular with respect to the risk categorisation of the soon-to-be licensed entities.
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