The Swiss Financial Market Supervisory Authority (FINMA) has established the guidelines for granting FinTech licenses starting with 2019. The new guidelines aim to significantly simplify the application process for interested parties.
The Swiss parliament has introduced the new FinTech license granted to persons under the Article 1b of the Banking Act to boost financial companies by relaxing the current requirements for obtaining such a license. Thus, the Federal Council has set out the terms of this license in a Banking Ordinance.
By holding a FinTech license, institutions are allowed to accept public deposits of up to CHF 100 million, under the condition that the deposits are not invested and no interest is paid on them. An addition requirement establishes that institutions with FinTech licenses must have registered offices in Switzerland and conduct their business activities in the country.
The authority responsible with granting a FinTech license is FINMA, which also has the role of supervising the respective institutions. To simplify the application process for a FinTech license, FINMA has published a set of guidelines. Interested parties that have the intention of obtaining such a license also have the possibility to present their projects to FINMA before they submit the license application.
Any change of the basis on which the FinTech license is granted must be reported to FINMA. Furthermore, in the case of material changes, FINMA must first grant its approval before the institution can continue with its operations.
Business operations for persons under the Article 1b of the Banking Act should not be conducted before obtaining a FinTech license from FINMA.
Requirements for the FinTech license application
The license application must contain the following information:
- The reasons for the application;
- A description of the organization and its activities, including the target clients and geographical scope;
- A certified extract obtained from the Swiss commercial register;
- Information about the business premises, its staff and infrastructure;
- Information about the group of companies, participation or other presences of the applicant, if there is the case.
Participations in the applicant to consider:
- Share capital (nominal value, subscription etc.);
- A list of all participants with a direct or indirect holding of at least 5% (beneficial owners with voting rights and capital interest);
- A graphic illustrating all directly or indirectly qualifying participants up to the level of the beneficial owner, broken down by voting right and capital or by shares;
- Information regarding any existing agreements or other ways in which the applicant may be materially influenced and their respective documentation;
- Persons who hold a qualifying participation must provide a declaration as to whether they hold the participation on their behalf or on the behalf of third parties and if there is the case of granted option facilities or similar rights for the respective participations.
The FinTech license application must also contain information about the governing bodies of the business. The required information refers to the composition of the governing body entrusted with the administration of the business and the composition and organization of the executive board.
In addition, information must be submitted regarding the members of the governing bodies, such as:
- Personal information;
- Copies of the identification documents;
- Copies of the Swiss residence permits for foreign individuals;
- Copies of diplomas and other references;
- Swiss criminal record extracts;
- Criminal record extracts from the previous country of residence for foreign individuals who have lived less than 5 years in Switzerland;
- Debt enforcement register extracts;
- Declarations regarding concluded and pending legal proceedings;
- Declarations regarding other participations in supervised institutions;
- Declarations regarding other directorships.
Regarding the internal organization and the business activity of the applicant, the documentation submitted along with the FinTech application must include:
- Detailed descriptions regarding the business processes and activities;
- A business plan which must include the budget for the next financial three years, with realistic, optimistic and pessimistic scenarios;
- The Articles of Association and other organizational regulations, tailored to the business activities of a person pursuant to Article 1b of the Banking Act;
- An organizational chart;
- Regulations and policies related to the internal control system, risk and compliance;
- Outsourced activities;
- A detailed description of how public deposits are held;
- Details of information for clients pursuant to Article 7a of the Banking Ordinance;
- Descriptions of any conflict of interest and the related measures pursuant to Article 14g of the Banking Ordinance.
The applicant must prove that the financial requirements are met by providing appropriate evidence proof of compliance with the minimum capital requirements and anticipate minimum capital trends in line with the business plant (including information about financing or capital sources).
Interested parties must also agree to regulatory audits and provide information regarding the services of approved audit firms.
Groups that operate in the financial services sector must also provide an organizational chart with information about any existing or planned licenses granted under the financial market law.
Changes made to the licensing basis
All changes that influence under any circumstances the granted FinTech license must be submitted to FINMA for approval. These are just some of the changes that require approval from FINMA:
- Changes related to important documents, such as the articles of association and the organizational rules;
- Changes related to the holders of qualified participations;
- Changes regarding the persons entrusted with the management and administration of the business;
- Any changes related to the organization;
- Changes related to the internal corporate governance regulations;
- Changes related to the core and non-core business activities;
- Changes related to the outsourced core activities.
The license application must contain justifications for any type of changes made and relevant information. Changed documents must also be submitted for approval. Depending on the nature of the changes, in some cases, it is advisable to discuss them with FINMA representatives in advance.