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A panorama of FINMA's enforcement activities in 2015

Chris Hamblin, Editor, London, 20 May 2016

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The Swiss federal financial regulator concluded several major 'enforcement' cases last year and stepped up its campaign against misconduct among employees and the top management of supervised institutions.

Of the 794 investigations that FINMA (the Swiss Financial Market Supervisory Authority) conducted last year, 55 resulted in "concluded enforcement proceedings" (excluding international cooperation and insolvencies).

Investigations by topic

  • Licence holders. During 2015 there were 9 investigations into licence applications (2014: 9 also); 31 into the liability of individuals (2014: 27); 40 into 'organisation,' (33); and 29 into 'due diligence' requirements under the Anti-Money-Laundering Act (21).
  • Unauthorised activities. Here FINMA looked into 54 unauthorised securities dealers (2014: 33); 215 unauthorised acceptances of public deposits (88); 20 uses of unauthorised terms such as 'bank' (2); 299 unauthorised AMLA fiancial intermediaries and/or intermediaries not affiliated to any self-regualtory organisations (133); 43 unauthorised Swiss collective investment schemes (13); and 8 cases of unauthorised insurance activity (3).
  • Market supervision. There were 93 cases of insider dealing (93 also in 2014) and 18 cases of market manipulation (17 in 2014).
  • Disclosures. There were 9 investigations into recommendations (7) and 43 into breaches of disclosure requirements (102).

The people and entities involved in investigations

FINMA likes to use the word 'stakeholder,' although it does not define it. Its figures for the number of "investigations concluded by stakeholder affected" are, in other words, incidences of the involvement of various people and other legal entities by sort and many investigations involve more than one.

  • Investiations of licence holders. These involved 55 banks (2014: 57); 8 DSFIs (11); 10 insurers (3); 7 asset managers of Swiss collective investment schemes (7); and 18 individuals (17).
  • Investigations of unauthorised activities. These involved 496 legal entities (482) and 16 invidividuals (29).
  • Investigations of disclosures. These involved 6 banks and/or securities dealers (4); no DSFIs (1); no insurers (1); no asset managers of Swiss CIS (0); and 42 investors (94).

Enforcement proceedings concluded by area

These were against 16 licence holders (2014: 21), of which five were banking/securities dealers (9); two were to do with insurance activity (1); two were DSFIs (5); none were asset managers of Swiss CIS (1); two were foreign CIS (5); and five were from another area (0). Unauthorised activities accounted for 15 cases (2014: 22). The total number of proceedings (including six discontinued ones) was 55. The figure for 2014 was 59, of which three were discontinued.

Parties affected by concluded enforcement proceedings

Who were affected by these cases? On the understanding that many entries may come from the same case, FINMA says that 22 licence holders were affected (2014: 38); 26 employees or top managers of licence holders were affected (17); and 35 unauthorised financial service providers (this includes people and firms) were affected (91). In all, the figure for 2015 was 83 and that for 2014 was 146.

In 2015, FINMA initiated two insolvency-related investigations into banks that held licences under the Banking Act 1934 and SESTA (the Stock Exchange Act 1995) and concluded one (2014: 3 started, 2 concluded). It began insolvency-related investigations into 18 unauthorised financial service providers under those two Acts and concluded 32 (2014: 32 started, 33 concluded).

MLAT or MOU requests

Mutual legal assistance treaties (MLATs) are always important in the offshore world. Switzerland (or at least FINMA) received 260 requests for 'assistance' (which might involve memoranda of understanding with foreign regulators rather than MLATs in some cases - the figures do not tell this) to do with market supervision in 2015, up from 227 in 2014. This statistic takes in insider-dealing, market manipulation and breaches of other stock exchange rules. It also had to deal with 267 requests for help with 'institution supervision,' which took in everyting from general enquiries and banking and insurance supervision to courtesy visits, offences against the AMLA (Anti-Money-Laundering Act) and CISA (Collective Investment Schemes Act) and breaches of disclosure requirements. Requests to do with article 271 of the Swiss penal code (felonies and misdemeanours against a state) were also part of that figure. The statistic for 2014 was 479.

Article 271(1) states that "[a]ny person who carries out activities on behalf of a foreign state without lawful authority..." commits a crime. This obviously takes in reporting to the US Internal Revenue Service about the contents of American taxpayers' accounts in breach of Swiss secrecy laws. The Swiss authorities have allowed Swiss banks to circumvent this conundrum by the simple expedient of promising not to enforce the law, presumably hoping also that no mischievous private individual will ever press charges.

Who asked for assistance?

All the usual suspects appear in the list of applicants for international assistance, although the Americans only represent 61 requests and do not occupy the top position on the list. That honour goes to France, with 96 requests (2014: 73). Then comes the United States, then Germany with 56 (66); the United Kingdom with 31 (33); Austria with 23 (23); Italy with 17 (15); Canada with 15 (13); and Liechtenstein with one (two). There were 147 (120) other requests from countries in the European Union and 12 (15) from European countries outside the EU. The rest of the world accounted for 85 (67). The total number of requests is up on 2014: 544 as opposed to 479.

Client-related procedures

In terms of requests for assistance from foreign authorities, 274 clients were notified in 2015 (previous year: 352), of which 28 (previous year: 25) subsequently requested an appealable ruling. In all, 20 (previous year: 11) rulings issued by FINMA went on appeal to the Federal Administrative Court. The latter came to a decision in 14 (previous year: 12) cases, in the year under review, upholding FINMA’s rulings in 12 (previous year: 12) of those cases.

Whom did FINMA approach for assistance?

As one might expect, FINMA's requests for help from abroad do not amount to much – 38 in 2015 and 34 the previous year. In 2015 it made 11 requests to Germany (2014: 4); 8 to the UK (9); 3 to Liechtenstein (5); two to Austria (3); none to the US, Italy, Canada or anywhere in Africa (0); 8 to elsewhere in the EU (4); one to elsewhere in Europe outside the EU (2); and 5 to Asia and Latin America (3). Of these, three concerned licence holders (2014: 13); 20 unauthorised financial service providers (11); and 15 market supervision (10).

Rulings by area

In 2015 FINMA made 114 rulings of various kinds and in the various languages of Switzerland (2014: 115), of which 21 concerned licence holders (35); 41 unauthorised financial service providers (38); 11 market supervision (6); one disclosure (0); two takeovers (2); 10 insolvencies (8); 28 international co-operation (25); and nothing in any other category (1).

In this list of rulings, the unauthorised acceptance of public deposits came up 20 times (17); the use of terms such as 'bank' came up three times (0); unauthorised securities dealers came up 17 times (11); unauthorised AMLA financial intermediaries and/or intermediaries not affiliated to any SROs came up five times (5); unauthorised Swiss CIS came up three times (4); and there was no ruling on any unauthorised insurance activity either in 2015 or the previous year.

Criminal complaints

As for criminal complaints that FINMA passed on to the Federal Department of Finance Criminal Law Department, 75 concerned named individuals (up on 60 in 2014) and 137 concerned named legal entities (up on 106). There were 29 mentions of unauthorised acceptance of public deposits (11); 13 mentions of uses of terms such as 'bank' (6); four of unauthorised securities dealers (6); 26 of unauthorised AMLA financial intermediaries and/or intermediaries not affiliated to any SROs (12); 15 of unauthorised activity under CISA (6); three of unauthorised insurance activity (1); 41 of reporting requirements under SESTA (46); one of reporting requirements under the AMLA (2); 7 of incorrect information provided to FINMA (2); and 10 other (13).

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