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Position and Status of Securities Dealers
The Swiss securities dealers represent medium-sized firms offering financial services. Securities dealer are like banks and insurance companies, and in contrast to so called independent asset managers directly and fully regulated by the FINMA.
The regulatory status of being a securities dealer allows to perform most of the important services in the financial industry.
According to Swiss legislation, securities dealers are allowed to be custodian of cash and security accounts for their clients. However, in contrast to the regulatory status of a bank, securities dealers are not allowed to engage in interest difference transactions. The regulatory basis of Swiss securities dealers was introduced in the late nineties with the enactment of the Exchange Act. The Banking Act is – with a few exceptions – fully and directly applicable to securities dealers.
- Swiss securities dealer must (i) meet bank’s legal adequacy requirements and (ii) have a minimum capital of CHF 1.5 million (approximately € 1.37 million). In contrast to banks, securities dealers must also comply with the so-called base requirement, i.e. the capital must amount to a minimum of 25% of the full annual expenditure.
- Client confidentiality of securities dealers is identical to the banking secrecy.
- Audits must be conducted by a FINMA approved auditor.
- In addition, securities dealers must have an independent internal audit.
- The board exercises only supervising functions and does not interfere with the Management functions of securities dealers.
- Finally, Swiss securities dealers are part of the Deposit Protection of Banks and Securities Dealers.
The enactment of the federal Stock Exchange Act has led to a different perception of securities dealers. Whereas historically, securities dealers have been primarily B-concessionaries or exchange agents, they are nowadays predominantly medium-sized asset managers, sometimes even active in brokerage and investment banking.
In a European context, securities dealers are the most regulated investment firms, which are characterized by a minimum capital of € 730,000 (so-called “730K-firms”). In the German implementation these are the “securities trading banks” and “portfolio managers”.