FIDLEG SOLUTION - News 04/2020

Impact of Covid-19 on Financial Service Providers such as Asset Managers and providers of financial instruments

The coronavirus is on everyone's lips and worldwide parliaments, governments and authorities pass laws and regulations and other publications about it. As of 27 March 2020, on the ESMA website alone, 28 publications on COVID-19 can be found here.

In addition, there are the enactments of the national parliaments, governments and authorities:

  • The publications of the Financial Conduct Authority (FCA) can be found here.
  • The publications of the German Federal Financial Supervisory Authority (BaFin) can be found here.
  • The publications of the French Autorité des Marchés Financiers (AMF) can be found here.
  • The publications of the Austrian Financial Market Authority (FMA) can be found here.
  • The publications of the Financial Market Authority Liechtenstein (FMA) can be found here.

In Switzerland, the Federal Council issued the Ordinance on measures to combat coronavirus [COVID-19] on 28 February 2020 (SR 818.101.24). This Ordinance was replaced on 13 March 2020 by Ordinance 2 on measures to combat coronavirus (COVID-19 Ordinance 2; SR 818.101.24) here. The Federal Council issued explanatory notes on this Ordinance 2 (download here). This Ordinance and the explanatory notes are regularly amended. The latest versions can be viewed on the following website: here.

THE OPERATION OF FINANCIAL SERVICE PROVIDERS AND FINANCIAL INSTITUTIONS UNDER COVID-19 ORDINANCE 2

According to art. 6 para. 2 of COVID-19 Ordinance 2, establishments open to the public shall be closed under the heading "Events and Establishments". This includes shops, markets, restaurants, bars, cinemas, etc. and thus probably also publicly accessible offices such as shared offices. Art. 6 para. 3 of COVID-19 Ordinance 2 lists the establishments open to the public which are not closed, such as grocery stores, post offices and banks.

Office premises are neither mentioned in the list of closed facilities under art. 6 para. 2 of COVID-19 Ordinance 2, nor in the list of open, publicly accessible facilities under art. 6 para. 3 of COVID-19 Ordinance 2. The reason is that office premises are simply not deemed to be publicly accessible facilities because they are not "publicly accessible" - with the exception of the shared offices mentioned above. This means that the offices of financial service providers and financial institutions may continue to be operated as before.

However, it should be noted that the Swiss Federal Office of Public Health (BAG) has issued special recommendations concerning hygiene and social distance (here). It is indeed mandatory to comply with these recommendations only in those publicly accessible establishments which are open to the public pursuant to art. 6 para. 3 of COVID-19 Ordinance (art. 6 para. 4 of COVID-19 Ordinance 2). However, due to the employer's duty of care towards its employees according to art. 321a Swiss Code of Obligations (CO), these recommendations should also be observed in all other companies, i.e. also in facilities that are not open to the public, such as offices spaces.

This means, for example, that

  • employees in their offices must be at least two meters apart;
  • during meetings between the participants a distance of two meters must be maintained (keep one chair free);
  • during coffee breaks and other breaks, employees must keep a distance of two meters between themselves;
  • particularly vulnerable people should keep an even greater distance.

If these measures cannot be complied with, the employee's liability for any medical expenses cannot be excluded, provided it can be proven that the infection occurred in the offices.

Conclusion: Financial service providers and financial institutions may still be operated, also possible counters and client meetings may be carried out. However, the recommendations of the Federal Office of Public Health regarding hygiene and social distance must be observed.

THE OFFER OF FINANCIAL INSTRUMENTS AND FINANCIAL SERVICES IN SWITZERLAND UNDER COVID-19 ORDINANCE 2

The COVID-19 Ordinance 2 does not comment on the offer of financial services and financial instruments in Switzerland and therefore does not restrict these activities. This means that financial services may continue to be provided despite the COVID-19 Ordinance 2. However, the following points must be observed:

Ban on private events such as roadshows

Not only public but also private events are prohibited (art. 6 para. 1 COVID-19 Ordinance 2). A private event is not defined with a certain number of participants. Rather, the explanatory notes define private events as follows: „A (...) private event (...) is a temporary, planned event taking place in a defined room or perimeter, in which several people participate. This event usually has a defined purpose and a program sequence with thematic and content-related links.“

A private event must therefore be considered to be, for example, a roadshow, a lecture, a presentation, etc. Such events, even with access control and in private rooms, are prohibited, even if they are held for the purpose of offering a financial service for which no other restrictions apply.

Admissibility of meetings at the workplace

In contrast to private events, meetings at the workplace are still permitted according to the explanatory notes. This means that meetings with customers and potential customers are also permitted, such as sales meetings, pitches, etc.

However, the special recommendations issued by the Federal Office of Public Health (BAG) regarding hygiene and social distance (see above) again must be strictly adhered to and the number of session participants must be limited, whereby approx. 4m2 of space must be available per meeting participant.

Alternative channels of supply

This forces financial service providers to look for other ways to establish or maintain contact with clients and investors and potential customers clients and investors.

It should be noted that such alternative means of communication are also covered by the Swiss Financial Services Act (FinSA) and that the same provisions of financial markets laws must be observed as if the financial services were provided or offered among people present on site.

THE OFFER OF FINANCIAL INSTRUMENTS AND FINANCIAL SERVICES BY FOREIGNERS TO SWITZERLAND UNDER COVID-19 ORDINANCE 2

If financial instruments and financial services are offered in Switzerland from abroad, the above-mentioned regulations generally apply as well.

Restrictions on border crossing

However, the measures against the crossing of borders from risk countries must be observed. Based on art. 3 para. 1 COVID-19 Ordinance 2, border control must refuse entry into Switzerland to all persons who come from a risk country or region. The risk countries and regions are listed in Appendix 1 to COVID-19 Ordinance 2. The list currently includes all Schengen states as well as the Principality of Liechtenstein (as of 27 March 2020). Exceptions exist for, among others:

  • persons with Swiss citizenship
  • persons with a travel document and a Swiss residence permit

Anyone who comes from a risk country or risk region and has neither a Swiss citizenship nor a Swiss residence permit and wishes to enter Switzerland only to offer financial services and financial instruments will, therefore, be refused entry. Thus, the explanations provide that entry for the purpose of participating in events is not permitted.

Financial services from abroad to Switzerland are covered by FIDLEG

This is likely to encourage many financial service providers from abroad not to travel to Switzerland, but rather to offer their financial services by other means, such as by telephone, e-mail or on digital platforms (Skype, Zoom etc.).

It should be noted that the offer of financial services and financial instruments made this way falls under Swiss law, in particular FinSA, in exactly the same way as if the offer had been made among persons present in Switzerland. The same rules must therefore be observed.

THERE IS MORE TO COME…

The next edition of FIDLEG SOLUTION will deal with the transitional provisions according to FIDLEG.

Your FIDLEG SOLUTION Team
www.fidlegsolution.ch


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