Switzerland Update: New registration obligation for robo-advisors

New registration obligation in the register of advisors when using software-based applications such as Robo-Advisor and Neo-Broker

According to the Swiss Financial Services Act (“FinSA”), client advisors of Swiss financial service providers who are not subject to prudential supervision and client advisors of foreign financial service providers must register in a register of advisors before they can carry out their activities in Switzerland. Financial service providers subject to prudential supervision are, in particular, banks, investment firms, asset managers and fund management companies, all of which are supervised by the Swiss Financial Market Supervisory Authority FINMA.

To date, FINMA has approved three registers of advisors. The consultant registers Regservices and RegFix have now added another FAQ to their Frequently Asked Questions (which can be accessed online here and here). FAQ No. 24 now deals with the question of whether the provision of financial services using software-based applications such as so-called robo-advisors and neo-brokers creates an obligation to register in the register of consultants.

Until now, this question had usually been answered in the negative in legal literature, since the wording of the FinSA contradicts it and in Art. 3 lit. e Client advisors are defined as “natural persons who provide financial services on behalf of a financial service provider or themselves as a financial service provider“.

The new FAQs of the register of advisors, on the other hand, state that the purpose of registration in the register of advisors, which is to ensure a minimum standard of investor protection in the event of the involvement of non-prudential financial service providers, must be ensured, regardless of the chosen form of provision of the financial service.

If a financial service is provided accordingly by means of software-based applications without the direct involvement of a human being (e.g. Robo-Advisor or Neo-Broker), in practice, an entry obligation in the register of advisors is triggered. The following must be entered:

1. the person(s) primarily and significantly responsible for the provision of the financial service; or
2. if (1) does not exist, the member of the Executive Board responsible for the financial service to be provided.

The persons to be registered must meet all the requirements required for registration in the Register of Advisers.

The third Swiss advisory register currently approved by FINMA, the Association Romande des Intermédiaires Financiers (ARIF), has not yet adapted its FAQs to this development. However, we expect this to happen in the near future.

FINMA has taken note of the English version of the new FAQs, which in practice means that FINMA supports the new interpretation of the registration obligation. Even if it is questionable whether the interpretation according to FAQ No. 24 is covered by the law and the implementing provisions, robo-advisors and neo-brokers who are not prudently supervised or offer their services from abroad to Swiss clients should therefore register the responsible persons with one of the Swiss registers, if they have not already done so.

By Vischer, Switzerland, a Transatlantic Law International Affiliated Firm.

For further information or for any assistance please contact switzerland@transatlanticlaw.com

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