FEDERAL ACT ON FINANCIAL SERVICES (FinSA)
1. General information: objectives of the law
The Federal Act on Financial Services entered into force on January 1, 2020 and it aims to:
• strengthen the protection of investors;
• define rules of conduct regarding the offering of financial instruments and the provision of financial services
• create a level playing field among financial services providers.
2. Scope of application and identification of the financial services provider
The FinSA applies to all financial services providers (“FSPs”) operating in a professional capacity, which includes banks and issuers and suppliers of financial instruments in Switzerland. Most of FinSA’s provisions benefit from a transitional period until January 1, 2022.
In this context, Fern Wealth GmbH (“Fern Wealth”) is subject to the FinSA. The address of Fern Wealth’s registered office is:
Fern Wealth GmbH
Bundesplatz 14
6300 Zug
Switzerland
Fern Wealth is duly licensed wealth manager and is ultimately subject to the supervision of the Swiss Financial Market Supervisory Authority (FINMA – Laupenstrasse 27, 3003 Bern).
Fern Wealth is an independent wealth manager and focuses on wealth management for retail clients. Fern Wealth therefore offers wealth management services as well as pension optimisation solutions.
The FinSA thus applies to Fern Wealth since it provides the following financial services:
• the purchase or sale of financial instruments,
• the receipt and transmission of orders for financial instruments,
• investment advice,
3. Client classification
Fern Wealth collects personal data for the purposes and on the legal basis hereafter, in accordance with the applicable data protection regulations:
The FinSA provides for the obligation for the institutions subject to it to classify their clients in one of the following three categories: “retail” clients, “professional” clients, “institutional” clients.
Classification
“Retail” clients
• Clients who are neither professional nor institutional
• Benefit from the most important and extensive protection
• Detailed information for retail clients
• Access limited to only certain financial services and instruments
• Not considered as “qualified investors” under the Swiss Federal Act on Collective Investment Schemes (CISA); however, the signing of a management or advisory mandate in favour of Fern Wealth automatically gives the status of qualified investor
“Professional” clients
• Deemed to be able to make informed investment decisions
• Assess the risks and scope of their investments based on their knowledge and experience
• Can financially bear the risks and consequences of their investment decisions
• Limited protection
• Considered as “qualified investors” under the Swiss Federal Act on Collective Investment Schemes (CISA)
“Institutional” clients
• Have knowledge and experience comparable to that of financial services providers
• No application of the provisions on rules of conduct set out in the FinSA
• Include among others central banks, insurance companies and all financial intermediaries subject to prudential supervision, in Switzerland or abroad
• Considered as “qualified investors” under the Swiss Federal Act on Collective Investment Schemes (CISA)
Clients are automatically classified in one of these 3 categories of clients, by legal obligation, but they can request a change of classification (Opting-in/Opting-out, see next point 4):
Retail clients
Professional clients
Institutional clients
Non-professional or non-institutional clients, including professional clients who have opted in
• Public law institutions with a professional treasury
• Large companies
• Pension funds
• Companies with a professional treasury
• Private investment structures with professional treasury facilities set up for high net worth clients
• retail clients who meet the criteria of the FinSA and have opted out
• Institutional clients who have opted in
• Financial intermediaries
• Insurance companies
• Foreign clients subject to prudential supervision
• Central banks
• National and supranational institutions under public law with a professional treasury
• Professional clients who have opted out
4. Change in classification
The FinSA provides for the possibility to change categories, upon written request by the client, and provided that the required conditions are met.
4.1 Change to a more limited protection category (opting out)
A “retail” client may apply to be considered a “professional” client in the following cases:
• The client has (1) assets of at least CHF 500,000 and (2) the knowledge necessary to understand the risks of investments, thanks to personal training and professional experience or comparable experience in the financial sector
Or
• The client has assets of at least CHF 2 million.
Direct investments in real estate, social insurance claims and occupational pension assets are excluded from the above amounts.
The following clients may apply to be considered as “institutional” clients:
• Swiss or foreign collective investment schemes (or their management companies), not subject to prudential supervision;
• Companies, pension funds and other institutions serving occupational pension purposes, provided they have a professional treasury.
4.2 Change to a category offering broader protection (opting in)
• A “professional” client may request to be treated as a “retail” client.
• An “institutional” client may request to be treated as a “professional” client.
5. Code of conduct
Rules of conduct are an important element of investor protection. For this reason, the FinSA obliges FSPs to comply with the obligations under supervisory law when providing financial services to “retail” and “professional” clients. These rules of conduct therefore do not apply to “institutional” clients.
5.1 Obligation to inform
In order to meet this information obligation, the FSP shall, in particular, make available to their clients (i) information concerning the FSP (e.g. via an information brochure detailing its name, address, field of activity, etc.) and (ii) information on the financial services that the FSP may provide.
All of this information regarding Fern Wealth can be found below, under points 7, 8 and 9. Fern Wealth’s presentation brochure is available to clients on demand. In addition, all relevant information is also available on the Fern Wealth website: www.fernwealth.ch
In addition, the FSP informs its clients about financial services, costs, products and risks. In particular, clients are informed about (i) the financial service which is the subject of the personalised recommendation and the related risks and costs, (ii) the economic relations of the FSP with third parties with respect to the financial service concerned and (iii) the market offer taken into account for the selection of financial instruments by the FSP.
In addition, a Key Information Document (“KID”) on financial instruments is made available to “retail” clients when the acquisition of these instruments is not carried out within the framework of a discretionary management mandate. Thus, in the scope of personalised recommendations, the BIS enables clients to obtain information on the characteristics, risks and costs of the financial instrument concerned, allowing for an easier comparison between the various financial instruments.
When the advice or recommendation is given in absentia, the BIS can be made available to clients after the transaction has been concluded, provided that their approval has been obtained beforehand.
5.2 Appropriateness and adequacy of financial services
The obligation of the FSP to verify the appropriateness and suitability of the financial services offered to its clients varies depending on the financial services offered to clients:
Financial services
Verification
Investment advisory services related to individual transactions, without taking into account the client’s entire portfolio
• the FSP inquires about the client’s knowledge and experience
• The FSP verifies the appropriateness of the financial instruments before recommending them to the client
Asset management or investment advisory services taking into account the client’s entire portfolio
• the FSP inquires about the client’s financial situation and investment objectives
• the FSP also inquires about the client’s knowledge and experience with the financial service
Services limited to the execution or transmission of client orders
• the FSP is not required to verify the appropriateness nor the suitability of the transaction
• the FSP shall, however, inform the client of the lack of verification of the appropriateness and suitability of the transaction
If the appropriateness or suitability cannot be assessed due to insufficient information from the client, the FSP will notify the client before providing the financial service.
If the FSP assesses that a financial instrument is not appropriate or suitable for a client, the FSP will advise the client against it prior to the provision of the financial service.
In the case of multiple account holders or beneficial owners:
• the elements to assess the knowledge and experience normally relate to the account holders or beneficial owners of the relationship. In certain situations, other persons may be taken into account, such as a representative (at the client’s request), or persons authorised by an operating company;
• the assessment of the suitability is always based on the overall situation of the account holders or beneficial owners of the relationship. Thus, in order to ensure the highest level of protection in accordance with the FinSA, the account holders/beneficial owners will be classified in the category that ensures the highest level of protection (e.g. a joint account opened by a “retail” and a “professional” owner will be classified as a “retail” client).
5.3 Documentation and rendering of account
The obligation of documentation and reporting means that FSPs:
1. document:
• the financial services agreed upon and provided to clients, as well as the information provided by clients on which the FSP relied to agree upon and provide the financial service
• the fact that the FSP did not conduct any suitability or adequacy checks prior to providing the financial service
• the client’s needs and the underlying reasons for each recommendation, in case of investment advice
2. transmit and report at the request of clients:
• the financial services agreed upon and provided, as well as their costs
• the composition, valuation and evolution of the clients’ portfolios
• the documentation relating to point 1.
5.4 Transparency and diligence in relation to clients’ orders
The requirement for FSPs to be transparent and diligent with respect to clients’ orders means that FSPs:
• uphold the principles of good faith and equal treatment;
• execute clients’ orders in an optimal manner, ensuring the best possible result in terms of costs, speed and quality when executing clients’ orders and taking into account the price of the financial instrument and the costs related to the execution of the order;
• may borrow, as counterparty, the financial instruments from the clients’ portfolios, or transmit such operations as agent, only with the clients’ prior and express consent.
6. Mediation body
Client satisfaction is an integral part of the business, however if a disagreement between Fern Wealth and the client was not able to be resolved directly then the matter would be brought forward to Finos who would work towards an amicable resolution acceptable to both parties.
Finanzombudsstelle Schweiz (Finos)
Talstrasse 20 CH-8001 Zurich
Telephone: +41-44 552 08 00
E-Mail: info@finos.ch
www.finos.ch
This neutral and inexpensive – or even free – mediation body will then examine the request for mediation and the situation in a fair and impartial manner.
Information on the mediation request process is available on the Ombudsman’s website and can be obtained from Relationship Managers.
7. Financial services information
As mentioned in point 2, Fern Wealth offers wealth management and pension optimisation solutions. In particular:
• Asset management is based on an asset management mandate, whereby the client entrusts Fern Wealth with their assets to manage in accordance with the client’s established risk profile and the risk profile of the selected portfolio. Under the asset management mandate, Fern Wealth is the one to make the investment decisions.
• Investment advice is provided by Fern Wealth under an investment advice agreement. Fern Wealth recommends one or more financial instruments to the client, taking into account the client’s entire portfolio, in accordance with the client’s risk profile and the risk profile of the selected portfolio. In the context of investment advice, the investment decision, whether or not it follows Fern Wealth’s recommendations, is the sole responsibility of the client.
• Execution-only means that the client gives a buy or sell order and Fern Wealth executes it.
As part of the provision of its financial services, Fern Wealth informs its clients of the related costs. The client is informed of the costs and fees when the account is opened, by means of the Fees & Commissions brochure, and during the course of the business relationship, by means of any formal decision to apply a particular fee structure.
In addition, further information on the costs related to a financial instrument may be included in the Basic Information Sheet (BIS), or in the prospectus, if such documentation is available for the type of instrument concerned.
In all cases, the actual costs and fees related to the transactions are indicated on the transaction advice.
8. General risks related to financial instruments
Trading and holding financial instruments offer opportunities and come with financial risks. Clients must understand the risks associated with the various instruments they wish to trade and use. To this end, Fern Wealth provides its clients with the SBA’s “Risks of Trading in Financial Instruments” brochure.
This brochure is given to clients when they open an account and is also available on the Swiss Banking website. Clients can also request it from their Relationship Manager and ask any questions they may have.
9. Conflicts of interest
A conflict of interest is a situation in which opposing interests conflict. This is the case when the interests of clients, those of Fern Wealth, its employees or other intermediaries, are in conflict. For example, a conflict of interest arises:
• in the context of trading in financial instruments, Fern Wealth’s own interests (income) may conflict with those of its clients;
• when Fern Wealth receives remuneration from third parties with whom it has an economic relationship;
• when Fern Wealth remunerates its employees according to their performance, and intermediaries (insofar as this is authorised).
In order to ensure that these potential conflicts of interest do not put clients at a financial disadvantage, Fern Wealth has implemented measures to prevent and manage such conflicts, including:
• the adoption of organisational measures and procedures aimed at protecting the interests of clients (in particular the establishment of information barriers, separation of responsibilities, reporting and monitoring of transactions, etc.);
• informing clients that Fern Wealth may be an investment fund manager and that, in this capacity, it may receive a management fee;
• informing clients of the ranges of remuneration obtained from third parties with whom Fern Wealth has economic relations; these benefits or remunerations may be related to products held, delivered or purchased at the clients’ request;
• informing clients, whose relationships have been established through third parties acting as intermediaries, of the remunerations or commissions paid by Fern Wealth to these third parties; moreover, if the clients concerned receive services from an independent financial advisor or from an external asset manager while using Fern Wealth for custody services and execution of market transactions, Fern Wealth may pay a portion of the income from this relationship to the intermediary in question.
Fern Wealth complies at all times with the principles of its policy on the prevention, management and mitigation of conflicts of interest.
10. Other
This notice is intended exclusively for the clients of Fern Wealth GmbH.
The General Terms and Conditions, any other terms and conditions and any contract entered into with Fern Wealth, apply and remain in force.
Although every care has been taken in the preparation and review of this document, Fern Wealth does not accept any liability for the adequacy, reliability, completeness or accuracy of its contents, as some of the information provided in this document may have changed since it was given to clients.