Swiss regulator reviews effectiveness of “Direct transmission” circular

Maria Nikolova

Stakeholders are invited to share their experiences of implementing the provisions in the circular by September 13, 2019.

Switzerland’s Financial Market Supervisory Authority (FINMA) today announces a review of the effectiveness and application of the “Direct transmission” circular. As part of this ex-post evaluation, stakeholders can provide their opinions by September 13, 2019.

In foreign markets, international companies are increasingly facing reporting and information obligations to the relevant local authorities. Until the end of 2015, such Swiss companies risked prosecution in Switzerland when directly transmitting information to foreign authorities as this could be deemed an unlawful activity on behalf of a foreign state under Article 271 SCC. These supervised parties also risked penalties, fines or even the loss of access to markets if they failed to comply with their reporting and information obligations to the relevant local authorities.

Article 42c FINMASA entered into force on January 1, 2016. The provision states that supervised parties may transmit non-public information directly to foreign authorities and entities acting on their behalf, provided the conditions relating to administrative assistance / rights of clients and third parties are met. If information of substantial importance is to be transmitted, supervised parties must notify FINMA in advance. FINMA is also authorised to reserve administrative assistance channels as an alternative to direct transmission. The aim of the new provision was to facilitate the transmission of information abroad for supervised parties.

Previously, the absence of this legal framework meant that supervised parties risked prosecution when fulfilling their foreign reporting and information obligations in accordance with Art. 271 SCC (unlawful activities on behalf of a foreign state). In introducing this regulation, the legislator took into account the demonstrable need for international companies to be able to work together with foreign authorities, as well as the requirements and protective regulations for administrative assistance.

Art 42c FINMASA leaves scope for interpretation. To minimise uncertainty when applying the provision, FINMA implemented the relevant Circular (“FINMA Circular 2017/6 Direct transmission”) as of January 1, 2017 after holding a consultation.

Specifically, the Circular provides more detailed information on terms that are open to interpretation and sets out the processes for reporting to FINMA. In combination with the statutory article, it helps ensure a legally compliant and predictable situation when transmitting information. In addition, the Circular provides clarification on the requirements and processes relating to reporting obligations to FINMA.

The regulator notes that it appears that information is increasingly being transmitted under Art. 42c FINMASA without the involvement of FINMA. In the first year following the entry into force of the Circular, supervised parties disclosed 169 instances of information of substantial importance being transmitted (Art. 42c para. 3 FINMASA), while during the second year, this number had fallen to 87. In this respect, FINMA said to supervised parties on 28 occasions during these two years that they are not required to notify FINMA in future when similar information is to be transmitted. In addition, FINMA reserved administrative assistance channels on eight occasions in 2017, but only three in 2018.

Now that the Circular has been in force for more than two years and practical experience has been gained, FINMA is reviewing the Circular. The aim of this ex-post evaluation is to obtain feedback from stakeholders on the necessity, appropriateness and effectiveness of the Circular and, in particular, to receive suggestions for substantiated, specific needs to correct or amend it. The evaluation does not cover the substantive and formal requirements imposed by the legislator. Accordingly, stakeholders are invited to contribute their experiences and criticisms on the Circular “Direct transmission”.

Read this next

Institutional FX

FXSpotStream volumes hit 14-month high in November

FXSpotStream’s trading venue, the aggregator service of LiquidityMatch LLC, reported its operational metrics for November 2023, which moved higher on a monthly basis.

Digital Assets

Circle denies ties with Palestinian groups, TRON founder

Stablecoin issuer Circle has denied allegations that it facilitates funding for terrorist organizations.

Retail FX

CySEC hits operator of Titanedge, TradeEU with €90,000 fine

The Cyprus Securities and Exchange Commission (CySEC) announced that it has imposed a fine of €90,000 on Titanedge Securities Ltd due to shortcomings in their regulatory obligations.

Institutional FX

Cboe FX volumes retreats slightly in November 2023

Cboe’s institutional spot FX platform today announced its trading volume for the month ending November 2023, which took a step back after a strong rebound in October.

Institutional FX

Alpha Group seals Cobase majority acquisition

Foreign exchange service provider Alpha Group International plc (AIM: ALPH) has finalized its acquisition of Financial Transaction Services, operating as Cobase.

Digital Assets

TMNG Tokens Successfully Listed on MEXC Crypto Exchange

TMN Global proudly announces the successful listing of its native TMNG token on the MEXC crypto exchange, effective December 1st, 2023. This strategic partnership marks a significant milestone for TMN Global in the crypto space.

Institutional FX

Marex completes acquisition of TD Cowen’s PB business

London-headquartered commodities broker Marex has completed the acquisition of TD Cowen’s prime brokerage and outsourced trading business, which will be integrated into Marex’s capital market division. This division was established following the acquisition of ED&F Man Capital Markets in 2022.

Digital Assets

Talos introduces decentralized liquidity and onchain settlement with Uniswap and Fireblocks

“At the cornerstone of the DeFi ecosystem, Uniswap has the breadth of assets and depth of liquidity that institutional traders need. And to have this partnership powered by Fireblocks, a digital assets infrastructure provider trusted by some of the most renowned institutions, is very fitting.”

Digital Assets

FINMA-regulated crypto bank SEBA Bank rebrands to AMINA

“As we look forward to 2024, our ambition is to accelerate the growth of our strategic hubs in Switzerland, Hong Kong, and Abu Dhabi, and to continue our global expansion, building on all the successes we have laid down over the past years.”

<