24th February 2024

Better business. Better community

Business Industry and Financial

New Obligation to Register for Robo-Advisors

New Obligation to Register with a Client Advisor Register when Using Software-Based Applications such as Robo-Advisors and Neo-Brokers

Pursuant to the Swiss Financial Services Act (“FINSA“), client advisors of Swiss financial service providers that are not prudentially supervised, as well as client advisors of foreign financial services providers, must register with a client advisor register before they are allowed to carry out their activities in Switzerland. Prudentially supervised financial services providers are in particular banks, securities firms, asset managers and fund management companies, all of which are supervised by the Swiss Financial Market Supervisory Authority FINMA.

So far, FINMA has licensed three client advisor registers. The Regservices and RegFix client advisor registers have now added another FAQ to their Frequently Asked Questions (which can be accessed online here and here). FAQ No. 24 deals with the question of whether the provision of financial services by means of software-based applications such as so-called robo-advisors and neo-brokers gives rise to an obligation to register in the client advisor register.

Until now, this question was usually answered in the negative by legal scholars and practitioners, as the wording of the FINSA contradicts this and defines client advisors in Art. 3 lit. e as “natural persons who perform financial services on behalf of a financial service provider or in their own capacity as financial service providers.

The new FAQs of the client advisor registers, on the other hand, state that the purpose of registration in the client advisor register is to ensure a minimum standard of investor protection in the event of involvement of financial service providers who are not subject to prudential supervision, irrespective of the chosen form of provision of the financial service.

If a financial service is provided by means of software-based applications without the direct involvement of a human being (e.g. robo-advisors or neo-brokers), this will, in practice, trigger an obligation to register in the advisor register. The following natural persons must be entered:

  1. the person(s) primarily and technically 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 fulfil all the requirements necessary for registration in the client advisor register.

The third Swiss advisor registry currently licensed by FINMA, the Association Romande des Intermédiaires Financiers (ARIF), has not yet adapted its FAQs. 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. Although it is questionable whether the interpretation according to FAQ No. 24 is covered by FINSA and the implementing provisions, robo-advisors and neo-brokers that are not prudentially supervised or offer their services from abroad to Swiss clients should therefore register the responsible persons with one of the Swiss client advisor registers if they have not already done so.

link