Authorisation requirements for securities firms
As defined in Art. 41 FinIA, securities firms are dealers who, in a professional capacity, trade in securities in their own name for the account of clients (client dealers), trade in securities for their own account on a short-term basis, operate primarily on the financial market and could therefore jeopardise the functioning of the financial market, or who serve as a member of a trading venue (own-account dealers) or trade in securities for their own account on a short-term basis and maintain firm bid and offer prices in given securities permanently or on request (market makers). Pursuant to Art. 12 FinIA, persons who, in a professional capacity, underwrite securities issued by third parties on a firm basis or against commission and offer them to the public on the primary market (issuing houses) also require a licence, as do persons who, in a professional capacity, create derivatives and offer them to the public on the primary market for their own account or for the account of third parties (derivatives firms). A distinction must also be drawn between account-holding and non-account-holding securities firms.
Securities dealers require a licence to begin trading and are subject to prudential supervision by FINMA.
Licensing requirements
For a licence to be granted, there must be no doubt that the applicant meets or can meet all of the licensing requirements. The most important are:
- fully paid-up minimum capital of at least CHF 1.5 million;
- a business plan showing that compliance with capital adequacy and risk diversification rules as defined in Art. 63 FinIO can be ensured at all times;
- guarantee of irreproachable business activity by qualified participants and members of ultimate strategic and executive management;
- precise factual and geographical description of the business in the articles of association, partnership agreement and business rules (the types of securities traded, the markets they are traded on and the types of client served;. the scope of the business must be compatible with the securities firm’s finances and organisation);
- the institution is managed in Switzerland;
- effective separation of internal functions – in particular trading, asset management and settlement;
- appropriate recording, limitation and monitoring of market, credit, default, settlement, image, reputation, operational and legal risks;
- effective internal control system, internal audit function independent of executive management;
- appointment of a recognised audit firm for the licensing process;
- appointment of a recognised regulatory audit firm for ongoing supervision;
- applicants under foreign control must guarantee reciprocal rights on the part of the countries where qualified participants are domiciled;
- if the securities firm is part of a financial group: adequate consolidated supervision by a recognised supervisory authority.
Duration of the licensing process
The licensing process for securities firms takes place in constant dialogue with the applicants. The duration depends on the quality and complexity of the application and the current workload. In the case of applications with a foreign connection, the time it takes to receive a response from the competent foreign supervisory authorities must also be taken into account.
Contact for questions on the licensing process
The Authorisation section of the Banks division (authorization@finma.ch)
