FIDLEG Ombudsman: Which financial institutions will be exempt from the affiliation requirement in future?
The National Council made minor adjustments to the Federal Council's draft during its consideration of the business of adapting federal law to developments in the technology of distributed electronic registers(DLT Act). By 117 votes to 66, the National Council amended Art. 16 E-FINIG as follows:
"Art. 16
Financial institutions that do not provide financial services exclusively to institutional or professional clients in accordance with Article 4 paragraphs 3 and 4 of the Financial Services Act of 15 June 2018 (FIDLEG) in accordance with Article 3 letter c FIDLEG must join an ombudsman's office in accordance with the provisions of Title 5 FIDLEG at the latest when they commence their activities."
The Council of States has unanimously accepted the amended bill of the National Council. After the amendments to the DLT Act come into force (probably in mid-2021), only financial institutions with private clients will therefore have to (compulsorily) join an ombudsman's office.
Art. 4 paras. 3 and 4 FIDLEG contain the legal definitions of institutional and professional clients. Private clients are all clients who are not professional or institutional clients. According to Art. 5 para. 1 and 2 FIDLEG, wealthy private clients (and private investment structures set up for them) have the option of declaring to a financial institution that they wish to be considered professional clients(opting out).
"I am of the opinion that in future, financial institutions with wealthy private clients with an opting-out declaration will no longer be obliged to join an ombudsman's office."
Art. 16 E-FINIG only refers to Art. 4 para. 3 and 4 FIDLEG and not also to the opting-out provision under Art. 5 FIDLEG. The question therefore arises as to the personal scope of application. Specifically: Can financial institutions invoke Art. 16 of the Draft FinIA if financial services are provided to wealthy private clients with an opting-out declaration in accordance with Art. 3(c ) of the FinIA?
In the view of the National Council's committee handling the matter (Committee for Economic Affairs and Taxation, NR), Art. 16 E-FINIG is intended to relieve the burden on small DLT trading systems. There are no further indications for clarifying the question in the minutes of the Council debate. It is clear, however, that the exemption does not apply to (small) DLT trading systems because they are financial market infrastructures and not financial institutions (cf. Art. 2(a)(5a) E-FinfraG and Art. 2(1) FINIG).
In our opinion, it is not evident why professional clients(Art. 4 Para. 3 FIDLEG) should have a greater need to be able to (compulsorily) turn to an ombudsman's office than wealthy private clients with an opting-out declaration (Art. 5 FIDLEG). This is particularly the case because not every private client can make an opting-out declaration, but only those who are (a) suitably trained, experienced and wealthy or (b) very wealthy (cf . Art. 5 para. 2 FIDLEG).
As explained, no objective reason for a distinction is apparent and the purpose of the provision is to relieve the burden on financial institutions, which is why in future there will also no longer be an obligation for financial institutions that provide financial services to wealthy private clients with an opting-out declaration to join an ombudsman's office.
For further information, please contact Dr Hans Kuhn or Sebastian Wälti directly.