The fight against unauthorised providers

FINMA is also responsible for enforcing the authorisation requirements and professional disqualifications set out in financial market legislation. In other words, FINMA takes action against individuals and companies which operate without the required authorisation. FINMA does not have sole responsibility for enforcing the authorisation requirements set out in financial market legislation. It is the job of the criminal prosecution authorities to punish those responsible for illegal financial intermediation.

FINMA launches dozens of investigations into unauthorised financial service providers every year. In order to protect investors as a group, FINMA takes a range of measures against companies and persons operating without authorisation. However, FINMA does not have the resources to systematically and proactively monitor all the “grey areas” on the edges of the authorised and supervised financial sector. FINMA only investigates and intervenes when it becomes aware of an irregularity or an activity that may be illegal.

Investigations into unauthorised financial intermediation are generally prompted by complaints and queries from consumers, but may also result from information supplied by criminal prosecution authorities, foreign supervisory authorities, or the media. Information obtained from ongoing FINMA proceedings frequently opens up new avenues of investigation.

Each year FINMA receives several hundred reports, which it pursues with due rigour. However, in view of its limited personnel resources, FINMA must prioritise the reports that it receives. Cases in which information is received from multiple sources or where a great many investors are affected or large sums of money are involved are given priority. FINMA also reacts immediately when someone advertises services using FINMA’s protected logo or falsely claims to be authorised by FINMA. The aim here is to prevent investors basing their decisions on incorrect assumptions.

FINMA can only investigate specific evidence which suggests that a breach of financial market law may have occurred. As a matter of principle, FINMA does not act on generally formulated suggestions or questions (e.g. “Is Company X legitimate?” or “Should I invest in Company Y?”). How FINMA proceeds depends primarily on the case in question. The first step is to assess whether compliance with the law can be restored without recourse to formal proceedings. This may be the case, for example, if a market participant changes his or her business model, contracts or advertising, appoints a FINMA-accredited auditor, goes into voluntary liquidation, or obtains the required authorisation from FINMA or a self-regulatory organisation.

Formal proceedings can usually be avoided as long as a company, its business model and management team are legitimate and no investor assets are at risk. In addition, there must be no indications of criminality. The executives and companies must cooperate with FINMA and react promptly and honestly. FINMA writes to the companies in question, sometimes invites them to a face-to-face meeting, and demands confirmations.

For recent figures on unauthorised financial intermediaries and FINMA investigations, see the annual enforcement reporting.

If there are specific indications of a serious breach of financial market law and if compliance with the law cannot be restored in any other way, FINMA opens enforcement proceedings against the provider in question and, where appropriate, against individuals who are implicated. In proceedings of this kind, FINMA uses its statutory powers to establish the facts and take action against the companies and individuals.

In order to establish the facts of the case, FINMA can appoint an independent expert to act as investigating agent and carry out checks at the company’s premises. FINMA sets out the responsibilities and powers of the investigating agent in a ruling. It also attempts to secure any customer assets that may remain. If there are grounds for suspecting not only a breach of financial market law but also offences under criminal law, FINMA coordinates its actions with the criminal prosecution authorities in the cantons. Sometimes FINMA and the cantonal authorities may organise joint operations at a company's premises.

If these fact-finding activities indicate that a breach of financial market law has occurred, FINMA issues a final ruling in which it specifies the action required to restore compliance with the law. Where unauthorised providers are concerned, this frequently involves liquidating the company. In this case FINMA appoints a liquidator and monitors his or her activities. If the company is overindebted or illiquid, bankruptcy proceedings are launched. Either FINMA itself or an external bankruptcy liquidator will wind up the company.

Thereafter, FINMA can ban the individuals responsible from performing and/or advertising the unauthorised activity. It can also prohibit individuals from practising a particular profession or confiscate profits resulting from a breach of financial market legislation. Excerpts from the final ruling – specifically, prohibitions imposed on advertising or on practising a profession – may also be published as a warning to potential investors. FINMA also files charges of unauthorised activity with the Criminal Law Division of the Federal Department of Finance (FDF).

If unauthorised activity is suspected and if the provider in question fails to meet its obligation to provide information to FINMA, FINMA may be unable in some cases to clarify the suspicions and prescribe or enforce any necessary measures. This may be the case, for example, if the provider has no physical presence in Switzerland but there is nevertheless some connection with Switzerland (e.g. a false Swiss address on the website or in advertisements or other documentation). In these cases FINMA publishes the names of the companies or individuals on the FINMA warning list and the blacklist of the International Organization of Securities Commissions (IOSCO). Where appropriate, FINMA will also ensure that access to the company’s website and Swiss phone numbers is blocked.

FINMA takes reports of unauthorised activity seriously and checks them carefully. Pointers from investors help FINMA to identify illegal providers of financial services and take action against them. However, FINMA can only investigate specific evidence which suggests that a breach of financial market law may have occurred. Generally formulated reports and questions (e.g. “Is Company X legitimate?” or “Is Company Z authorised?”) are not specific enough to warrant investigation.

Individuals providing information about suspected abuses will not be kept informed by FINMA about its investigations and proceedings. Making a report does not confer any right on an individual to become a party to the proceedings. Such individuals must assert their interests in civil or criminal proceedings. As a matter of principle, FINMA does not provide information about its proceedings. Even if specifically asked to do so, FINMA will not confirm, deny or comment on investigations. It reserves the right to correct false or misleading information. FINMA cannot express an opinion on civil law disputes; this is a matter for the civil courts.

FINMA does, however, maintain a list of supervised institutions. If investors are uncertain, they can find out from the FINMA website whether a company or individual has been authorised by FINMA. If uncertainties remain, questions can be directed to questions@finma.ch.