Expert Insights

Expert Insights

The Beginning of a New Era for Trustees Active in Switzerland

The adoption today by the Swiss Federal Council of the final versions of the Financial Services Ordinance (FinSO) and Financial Institutions Ordinance (FinIO) marks the beginning of a new era for trustees active on Swiss soil. Together with the Financial Services Act (FinSA) and Financial Institutions Act (FinIA), adopted on 15 June 2018, the ordinances will come into force on 1 January 2020 and will bring about profound changes within the industry, as the profession transitions in the years to come from a (largely) unregulated one to a regulated one.

Many trust professionals feared that the specific features of trust relationships would not be fully understood by the Swiss legislative bodies and would thus not be taken into account in the new regulatory framework. At the onset, it did indeed seem that trustees had simply been considered as one type of asset manager.

The final contents of the texts are however reassuring in many respects. For instance, the education and professional experience requirements applicable to members of a trust company's senior management have been adapted in order to reflect industry standards. The Swiss government also carved out an exemption from licensing for private trust companies, whether they are held in trust, by a foundation or directly by a family member, as is the rule in many other jurisdictions. Finally, 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 fully recognised.

New supervisory organisations, which are to be entrusted with overseeing the activities carried out by licensed trustees and portfolio managers, will be established in the months to come. The Swiss Financial Market Supervisory Authority (FINMA), in charge of approving and supervising these new organisations, has already 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. Several industry experts were involved early on in structuring and establishing the processes of the future supervisory organisations, as well as in discussions with FINMA. These new supervisory organisations should therefore be well-equipped to face the challenges which lay ahead.

Trustees active on Swiss soil, meaning 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. If the experience of other professions which have undergone the transition from unregulated to regulated can teach us anything, it is that the process is rarely a smooth one, as it involves not only operational changes, but also a change in mind-set. It is suggested that certain actors will disappear as a result, whilst others will join forces with one another in order to reach a critical size that will allow them to cover their costs.

The adoption of legislative texts is often seen as the end of a long process, but in reality it is just the beginning of the journey. For trustees active in Switzerland, it marks the beginning of their journey as prudentially regulated financial institutions.

For further information on this topic, please contact Fabianne de Vos Burchart at or +41 (0)22 591 18 42.

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