|
Create Date: 2008-05-22 10:33:22 | Popularity Level: 117 |
|
| |
2008-05-22 11:07:15
 |
Swiss Federal Banking Commission
Switzerland: Foreign exchange traders
Thouvenin Rechtsanwälte, Zurich
www.iflr.com/?Page=10&PUBID=33&ISS=24583&SID=702998&TYPE=20
The Swiss Federal Banking Commission (SFBC) estimates that about 150 foreign exchange (forex) traders are registered as financial intermediaries in Switzerland, who have not been subject to regulation under Swiss banking and finance legislation. In particular forex traders managing accounts for more than 20 individual clients did not fall under SFBC supervision in the past, as long as those accounts were not interest-bearing and were only used to execute customer orders.
In recent years, the SFBC has seen a growing number of complaints, especially from smaller investors, regarding transparency, liquidity and risk disclosure, let alone the substantial losses sometimes suffered by these investors.
The SFBC took action in November 2007 by proposing an amendment to Article 3a paragraph 3 section c of the Swiss Banking Ordinance. Forex dealers will be required to apply for a banking status under the Swiss Banking Act of 1934, as amended. At the same time, security dealers and precious metal traders continue to be exempted with their client accounts under said Article 3a paragraph 3 section c. A banking status under the Swiss Banking Act requires a minimum paid-in share capital of Sfr10 million ($9 million) and further equity requirements to appropriately cover credit, operational and other risks. Bank management members in Switzerland must meet certain professional standards. A Swiss bank must also meet organisational standards, providing for separate corporate bodies for supervision, management and control.
From April 1 2008, existing forex traders in Switzerland are required to register with the SFBC. The registration process ends on June 30 2008. One year later, that is, on March 31 2009, forex traders must meet the above requirements and must have applied for a banking licence.
It is expected that many forex dealers will not be able to obtain a Swiss banking licence because they may not be able to meet the capital and/or organisational requirements. Instead of applying for a banking licence they may explore other legal avenues, such as teaming up with a Swiss bank or Swiss security dealer for example and acting as an independent asset manager, converting their business model by no longer accepting deposits from the public, or by offering their forex products by means of securities or through mutual funds. |
|
|
|
|
|
Comments
| |
|
|
|
|
SwissReader | 2008-08-03 16:38:40 |
|
|
BANKING AND FINANCIAL LAW –
BANKING LICENCE FINALLY REQUIRED FOR
CURRENCY BROKERS (FOREX TRADERS)
In its 2006 annual report, the Swiss Federal Banking Commission
(hereinafter “SFBC”) had announced its intention to take measures regarding the currency brokers (forex traders); the SFCB started a consultation procedure of its project to modify the Ordinance of May 17, 1972 on Banks and Savings Banks (R.S. 952.02; hereinafter “OB”).
To support the proposed modification, the SFBC explains notably having noticed an increase of abuses in the field of currency (forex) market and registered a growing number of complaints, often originating from small investors having suffered important losses and reproaching currency brokers to lack transparency as well as information on the risks linked to transactions on currency market.
In order to reinforce the protection of investors, the SFBC plans to
subject the activities of the currency brokers (forex traders) to a banking license and for that purpose to amend the OB.
The Swiss Legislation regarding banking and finance does not define the notion of cur rency brokers (forex traders). If the banks are the principal actors in the currency market, other participants can also take part, such as mutual funds specialised in forex operations, asset managers, and more recently, cur rency brokers acting on behal f of their clients, who accept funds from their clients and who, in order to execute the orders, own accounts on their behalf. It is the last category mentioned which is mostly concerned by the project of modi fication of the OB.
Even though the activities of the currency brokers are similar to those of the securities dealers, the former are not subject to the Federal Law on Stock Exchanges and Securities Dealers of March 24, 1995 (R.S. 954.1; hereinafter “FLSM”), as long as they do not deal with standardized derivatives on behalf of their clients.
Yet, from a financial point of view, the SFBC notices that the activities held by currency brokers (forex traders) on behalf of their clients, although containing many similarities with the deposit and credit activities reserved banks, are nevertheless not ruled the same way (level playing field).
According to the SFBC, such exemption f rom supervision is no
longer justi fied; on the contrary, deposits made towards currency brokers (forex traders) should be regarded as banking operations. Thus, the currency brokers (forex traders) working on behalf of their clients are required to obtain from the supervisory authority a license to exercise an activity as a bank.
Nevertheless, we can anticipate that a number of currency brokers (forextraders) working on behalf of their clients will not agree to the necessary effort of conforming to constraints on banking laws and, failing to obtain a banking authorization, will be led to review their working conditions, Several solutions can be envisaged to face this new rule. Either renouncing to act on behalf of clients, but only as independent managers, or merging with other establishments of the same kind in order to obtain critical assets
allowing them to envisage to transform into a bank, or again purely and simply giving up thei r market activities to a bank or an authorised stock dealer.
The consultation procedure will end on December 20, 2007. It is envisaged that the modification proposed by the OB wi ll take ef fect on April 1st, 2008. The currency brokers (forex traders) in activity to this date will have a period of 3 months to inform the SFBC, thus up to July 1st, 2008, and will have, in a period of one year starting from the date of effect of the modified OB, thus up to March 31, 2009 at the latest, to satisfy the requirements of the banking law and deposit an authorization request at the SFBC.
BCCC advises its clients regarding all legal aspects of their activities. In doing so, BCCC is closely following the evolution of
the banking and financial law, as well as the capital markets law
in Switzerland, which are part of its fields of specialization.
For further information about BCCC: www.bccc.ch. |
|
|
| |
|
|
|
|
Steve | 2008-06-12 11:42:26 |
|
|
GFX Group SA underwent a thorough audit by the SFBC during the course of 2007. As a result of this review we learned early that the SFBC will be requesting FX brokers in Switzerland to apply for a banking license as from April 1st, 2008 and we had started to prepare our company by increasing our share capital to CHF 10 Mio. (fully paid in). We also changed our external auditor to KPMG, who just completed our 2007 financial & MLA review.
We are in the process of applying for a banking license and as soon as we have the formal response from the SFBC we will let our clients and of course you know immediately.
With kind regards
Peter FURRER |
|
|
| |
|
|
|
|
Mike | 2008-05-27 21:10:02 |
|
|
|
|
|
| |
Add comment
|
|
| |
|
|
|
|
|
|
|
 |
|
