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FinSA Q&A: Contract Due Diligence Guidance

FinSA Q&A: Contract Due Diligence Guidance

UBS Business Solutions AG

Date: May 09, 2022

This product supports financial service providers in defining key areas where the FinSA may impact client-facing contracts and templates.

PV10285
$211.83

Author's Note

The product, a know-how collection entitled “ FinSA Q&A: Contract Due Diligence Guidance ” consists of 5 questions and answers (" Q&As ") as well as further guidance developed by the UBS team of regulatory experts and provides you with the basis for defining key areas where the new regulations may impact client-facing contracts as well as templates. Your purchase gives you access to a know-how collection prepared by UBS and may serve as a basis for you to establish your best practices as a financial service provider. Contract Due Diligence reflecting FinSA regulations When applying the FinSA in its interplay with the Swiss Financial Institutions Act (“ FinIA ”) and the revised Swiss Collective Investment Schemes Act (“ revCISA ”), financial service providers also have to understand how the new requirements may impact their client-facing contracts and templates. The rules in their interplay can be complex and the practice is still developing. A good understanding of such...

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The product, a know-how collection entitled “FinSA Q&A: Contract Due Diligence Guidance” consists of 5 questions and answers ("Q&As") as well as further guidance developed by the UBS team of regulatory experts and provides you with the basis for defining key areas where the new regulations may impact client-facing contracts as well as templates.

Your purchase gives you access to a know-how collection prepared by UBS and may serve as a basis for you to establish your best practices as a financial service provider.

Contract Due Diligence reflecting FinSA regulations

When applying the FinSA in its interplay with the Swiss Financial Institutions Act (“FinIA”) and the revised Swiss Collective Investment Schemes Act (“revCISA”), financial service providers also have to understand how the new requirements may impact their client-facing contracts and templates. The rules in their interplay can be complex and the practice is still developing. A good understanding of such impact may hence be helpful in order to avoid regulatory and operational risks in this context.

These Q&As are essential practical knowledge for those that provide financial services in Switzerland or to clients in Switzerland.

For a full overview of the questions covered by this product, see Questions answered by UBS' FinSA Q&A under the Special Topics section.

What you get

After you make your purchase, PartnerVine makes the Q&A available to you for download as a searchable pdf. Below are two Q&As from this product so you can see a sample of what you will get:

Samples of the Q&A

How do the new rules regarding the FinSA client classification and CISA investor segmentation impact client contracts?

In general, financial service providers conduct classification of their clients by separate forms (e.g., opting-in and opting-out declaration, client information letters, where required, risk information in connection with being classified as professional and institutional clients etc.). Similarly, clients can be informed on their status as qualified investor in case of a discretionary or advisory agreement with separate letter complying with the requirements stipulated in art. 6a CISO. This may, in particular, be appropriate for existing clients in order not to re-document entire contracts while for new clients templates can be amended accordingly.

Thus, client classification documents are generally separate from client contracts. However:

  • If an existing contract refers to any type of client classification, such reference must be aligned with the definitions under the FinSA and revCISA.
  • The terms opting-in or opting-out are generally avoided in the contracts as they may not be aligned in the FinSA and CISA.
  • If the financial service provider intends to limit the service described in a contract to clients with a specific classification only, e.g., only for professional or institutional client, it may make sense to include such limitations in the contract itself (besides implementation of controls).
  • The financial service provider may decide to add in its templates of advisory agreement (and discretionary agreement, if not already included) a wording to inform clients about their status as qualified investor, the risks and the right to declare to be treated as non-qualified investor.

What changes should be considered for client contracts in view of the appropriateness & suitability duties?

Financial service providers offering personal investment advice or portfolio management services are required to verify prior to providing the financial service whether a specific service or instrument is suitable or appropriate for a particular client (art. 10 et seq. FinSA). Whether and to what extent an assessment is required depends on the type of financial services offered (execution only, transaction-based advice, portfolio-based advice, portfolio management) and on the client classification (retail, professional or institutional clients).

Since the obligations differ depending on the financial services provided, it is essential that the contract correctly describes the services (e.g. portfolio management, portfolio-based or transaction-based investment advice). Please be aware that “investment recommendation” is a defined term under European Market Abuse Regulation, which needs to be distinguished from personal investment advice under the FinSA.

Where an existing contract refers to an appropriateness or suitability assessment, the wording needs to be aligned with the regulations, in particular, whether it refers to a suitability or an appropriateness test depending on the service.

A risk profile must be established according to art. 17(3) FinSO which is generally done separately and not as part of a contract.

In case of execution-only services, no appropriateness or suitability assessment must be conducted. Art. 13(1) and (2) FinSA in combination with art. 15(5) FinSO clients must be informed in case of execution-only that no appropriateness or suitability assessment will be performed and, in case such information is not repeated at the time of each transaction, the financial service providers must also communicate that this information is only provided once. Note that the terms, definition and requirements are not the same under the FinSA and MiFID II. Therefore, MiFID II may impose more stringent suitability or the appropriateness duties.

 

Who needs it

The FinSA Q&A: Contract Due Diligence Guidance is for financial service providers providing their services in Switzerland or to clients in Switzerland. If you are a financial service provider, this product helps you understand the impact of the new financial market regulations on client-facing contracts and templates.

About UBS

UBS Business Solutions AG ("UBS") is a wholly-owned subsidiary of the UBS Group AG. For more information on UBS, go to www.ubs.com.

Key features

Key features of this product include: 

  • Structured & easy-to-read. Structured in a reader-friendly, easy-to-access Q&A format that is aligned with the relevant regulations.
  • Easy-to-understand. The language is practical and business friendly. The explanations in the text are accompanied by tables and graphics which make it easier to understand and communicate the regulations.
  • Interconnected. The Q&As include references to related content in other modules of UBS' FinSA Q&A and third party content to help readers understand the issues.
  • Categorization. All of the Q&As are categorized into specific topic groups which you can adapt to your individual needs.
  • Upskilling your employees. Underlined terms are explained in the Glossary, which is a complementary product that comprises over 160 terms and definitions. Together with the Glossary, the Q&As provide knowledge management support not just for employees that know an issue well, but employees that need to learn about an issue, increasing expertise across your firm.
  • Cost & time savings. You receive extraordinary value when you purchase this product. As your usage increases, your savings increase dramatically (see the Relative Advantage Calculator on the left hand side and the section below on the Relative Advantage Calculator, which will help you understand the value of this product).

Relative Advantage

The FinSA Q&A: Contract Due Diligence Guidance gets rid of the need to research the impact of the new regulatory requirements on client-facing contracts and templates. The Relative Advantage Calculator on this page shows a conservative use case, and the amount you would save compared to doing the tasks without the benefit of our product. For the calculator, we've taken an hour as the estimate for a lawyer charging CHF 450 per hour to research the answer to one of our Q&As and 20 hours to establish the whole Contract Due Diligence Guidance. Our assumptions are conservative ones based on our experience. If you'd like to change our assumptions, you can do so in the calculator and run the number again. The value delivered by our product is meaningful in the vast majority of circumstances, and exceptional as your usage increases. 

Circumstances of Use

This product is intended for Swiss financial service providers and financial institutions and provides general information on the FinSA and related laws as of the date of finalization. Our objective is to provide the UBS' perspective of the law in order to help support a better understanding of the new regulatory framework in Switzerland. This product can be used either for implementing the new regulatory framework or as the basis of your own internal knowledge management. This product is not for use outside of Switzerland.

Important Terms

  • This product is provided to you only for use in Switzerland.
  • You are required to pay for this product by invoice after you have received it. As digital products are so easily replicable, there is no right of rescission for this product and your obligation to pay is unconditional.
  • This product is provided to you on a non-reliance basis. There is no guarantee that this product will address your particular facts and circumstances, and you will have no recourse to UBS or PartnerVine if you do not think it does.
  • Use of this product does not create an attorney-client relationship with UBS Business Solutions AG or PartnerVine, nor should the product be considered a substitute for qualified legal advice. If you need advice tailored to your facts and circumstances, please consult qualified counsel.
  • Your contract for this product is with UBS Business Solutions AG. You will not have recourse to PartnerVine in respect of your use and enjoyment of this product.

Support

This product is a downloadable pdf. There is no additional support for this product.




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