FDF basic information
The "Zimmerli Expert Commission" has adopted the first part of its report on "Integrated Financial Market Supervision", including a draft of the "Federal Act on Financial Market Supervision (Financial Market Supervision Act; FINMA Act), and has submitted them to the FDF. The "Federal Financial Market Supervisory Authority (FINMA)" shall be established as an institution under public law with its own legal personality. As a first step, the Swiss Federal Banking Commission (FBC) and the Federal Office of Private Insurance (FOPI) would be brought together organisationally into this new authority. FINMA would be endowed with supervisory instruments extending across areas of specialisation and would endeavour to strengthen the reputation of the Swiss financial centre and the stability of the Swiss financial system.
Financial markets are undergoing rapid change. This also requires a re-examination and adjustment of supervision. In order to keep step with current developments, supervision as well as the supervised institutions must be renewed. Internationally, the model of integrated supervision has proven itself to be successful. Its advantages consist in the use of the synergies arising from such integration, particularly with regard to expertise.
In order to fulfil its responsibilities, FINMA will require the broadest possible scope of action. The expert commission has therefore reached the conclusion that the legal form of an institution under public law is most appropriate. FINMA will accordingly be endowed with legal personality and will enjoy both substantive and financial autonomy. The examples of the Institute of Intellectual Property and Swissmedic show that the form of an institution has been used in the past for transformations of legal form within the Federal Administration.
For practical reasons, the expert commission has decided to examine the question of a possible integration of the Money Laundering Control Authority at a later date, i.e., in connection with the question of expanding prudential supervision of independent asset managers, introducing brokers, and foreign exchange dealers. In order to achieve a staggered integration, only the Federal Banking Commission and the Federal Office of Private Insurance will be integrated for now. This should enable FINMA a good start and time for initial development.
FINMA will be organised on a modular basis. It will therefore be able to incorporate further areas of supervision at a later time, if justified by the subject matter. The expert commission is convinced, however, that the Federal Gaming Board, for instance, does not belong in the integrated financial market supervisory authority.
Since FINMA will assume the responsibilities of the Federal Banking Commission (SFBC) and the Federal Office of Private Insurance (FOPI), it will in particular be the supervisory authority for banks, securities dealers, investment funds, private insurance companies, and the stock market.
According to the proposals of the expert commission, FINMA shall be endowed with a strategic and an operative organ as well as an auditing office:
The supervisory board, composed of seven to nine members, will primarily deal with the strategy of integrated financial market supervision and advise the management board on fundamental questions. The supervisory board shall be composed of members with appropriate expertise, since it will also issue the ordinance provisions delegated to FINMA as well as directives and circulars. Subject to approval by the Federal Council, it will elect the management board and its chairperson. Finally, it will oversee the supervisory activities and therefore the execution of laws of the FINMA management board.
In contrast to the members of the Federal Banking Commission (SFBC), the supervisory board will not make any decisions in individual cases. The execution of supervisory tasks will be the responsibility of the management board. The management board will be composed of the chairpersons of the so-called specialised departments and will have the power of disposition, taking the specialised requirements into account. To the extent that the dispositions do not have fundamental or interdepartmental character, the power of disposition may be delegated to the specialised departments. The management board will also prepare the bases for decision required by the supervisory board and will ensure that the supervisory board is kept informed. The chairperson of the management board will head the "Presiding Department".
According to the proposals of the expert commission, the staff shall be endowed with its own staff regulation issued by the Federal Council and be employed under public law. This will ensure the necessary flexibility, especially concerning salary rules. FINMA will depend on the recruitment of specialists and will therefore compete with the supervised entities in the labour market.
The costs of the two supervisory authorities to be integrated are already paid for by the supervised institutions. This will continue to be the case: The authority will charge fees to be paid by the supervised entities for individually attributable services. In order to cover the remaining expenses that cannot be directly attributed to a supervised entity, a supervision tax will be levied. This will be calculated on the basis of the economic performance of the supervised entity (e.g., gross revenues or premium income).
FINMA will keep its own accounts and have reserves at its disposal amounting to the annual budget.
FINMA will report annually on its activities to the Federal Council on behalf of the Federal Assembly. The responsible supervisory committee of the Federal Assembly as well as the Federal Council may request additional reports. The overall supervision by the Federal Assembly must in any case ensure that the independence of FINMA is respected.
The FINMA Act will not only contain provisions on the organisation of the new authority. In accordance with its mandate, the expert commission has also examined whether and to what extent universally applicable norms for all specialised areas of supervision could be enshrined in the FINMA Act.
The expert commission has decided to incorporate several supervisory instruments into the FINMA Act. These include provisions on public information, auditing, and co-operation with other authorities. These provisions supplement the supervisory instruments enshrined in special legislation and will apply to all areas of supervision.
The FINMA Act lays down the principles for public information provided by FINMA. As a general rule, official secrecy shall be maintained with respect to the individual procedures. FINMA shall only disclose information about ongoing procedures in exceptional circumstances, if disclosure is necessary to pursue the supervisory goals of FINMA.
The institutions supervised by FINMA are under an obligation to mandate an auditing company to audit compliance with all supervisory provisions, according to the so-called indirect (dual) supervisory system. As a general rule, this system shall now be introduced for all other institutions, as it has already been introduced for banking, trading in stock, and investment funds. The choice and replacement of auditing companies must be approved by FINMA. On the other hand, FINMA may also exercise supervision in exceptional cases (direct supervision). Some activities, in particular in the field of insurance, are namely not appropriate for indirect supervision. In addition, FINMA may itself mandate an independent expert or an auditing company.
Auditing companies must be approved by FINMA. According to the proposals of the expert commission, the following conditions must be met for approval:
Compliance with the approval conditions will be verified by means of direct supervision. FINMA will also verify the quality of the audits.
Due to international developments, these approval conditions may be subject to modification at a later time.
The audits shall verify the proper keeping of accounts and compliance with
the other supervisory provisions (account and supervision audit). The auditing
companies shall compile an annual report on their auditing activities.
As soon as the auditing company discovers a violation of supervisory provisions
or other abuse, it shall impose a deadline on the supervised institution to
remedy the situation. If this deadline is not met or if serious abuses are discovered,
the auditing company shall immediately notify FINMA.
FINMA can demand that the auditing companies conduct a detailed audit in individual areas of business.
If FINMA develops serious concerns on the basis of an auditing report, it will mandate another auditing company or an independent expert to conduct a second audit.
In addition, FINMA may conduct an audit in parallel with the auditing company, if the business activities of the institution are complex and relevant to the system or if a parallel audit appears necessary for other reasons (e.g., for purposes of assessing market and credit risks). This type of audit will mainly apply to large institutions.
As already envisioned in the current parliamentary consideration of amendments of the Banking Act to regulate bank restructuring, bank liquidation, and deposit guarantees, FINMA will also be able to mandate an independent expert to conduct inquiries at an institution and to implement the necessary supervisory measures pursuant to the instructions of FINMA.
The Act provides detailed conditions for approval of the auditing companies and for revocation of approval in case of non-compliance or gross violations. The possibility of revoking approval of the supervised institutions will continue to be available.
As soon as FINMA discovers crimes or criminal offences or violations of the penal provisions of the law governing financial market supervision, it will notify the responsible prosecution authorities.
The FINMA Act will also contain provisions on co-operation with Swiss and foreign financial market supervisory authorities (official co-operation, international audits).
Primarily in technical areas and in areas of minor impact, FINMA will issue
implementing regulations. Like the Federal Council, FINMA must bear in mind
that appropriate gradations must be incorporated into the regulations, depending
on the size and activities of the market participants. The renunciation of the
idea of "one size fits all" will thus also be enshrined in the mandate
for enacting ordinances.
07. July 2003