Switzerland’s robust regulatory framework provides a variety of pathways for financial institutions to engage in securities trading. For portfolio managers licensed under the Financial Institutions Act (FinIA), direct securities trading requires a separate securities firm license. However, there is an alternative: collaborating with licensed securities dealers or banks. This approach enables portfolio managers to offer securities trading services while staying compliant with Swiss regulations.
For more details on structuring your securities trading business in Switzerland, contact us at [email protected].
How Portfolio Managers Can Trade Securities Without a Securities License
1. Collaborating with Licensed Entities
- Portfolio managers can partner with licensed securities dealers or banks to execute trades on behalf of their clients.
- While portfolio managers provide investment advice and make decisions, the execution of trades is handled by the licensed entity, ensuring compliance with Swiss laws.
2. Advantages of the Collaboration Model
- Cost Efficiency: Avoids the significant expense and complexity of obtaining a securities firm license.
- Regulatory Compliance: Adheres to FINMA requirements by leveraging the partner’s license for securities trading.
- Operational Simplicity: Allows portfolio managers to focus on asset management while relying on the partner for trading execution.
The Financial Benefits of This Model
- Lower Capital Requirements:
- Collaborating with a securities dealer or bank can be started with as little as CHF 100,000, compared to the CHF 1.5 million minimum capital requirement for a securities firm license.
- Reduced Monthly Expenses:
- Operating without a securities firm license eliminates the need for costly compliance infrastructure and additional staff, reducing ongoing costs.
- Ready-Made Licenses:
- Partnering with licensed entities allows for immediate entry into the securities business without the delays of obtaining a license.
- Cheaper Entry to Market:
- This model provides a cost-effective way to enter the securities business, making it easier for smaller firms to test the waters and establish their client base.
- Firms can later upgrade to a full securities firm license when their business grows, allowing a phased approach to scaling operations.
Key Conditions for Compliance
- Clear Client Agreements: All roles and responsibilities must be clearly outlined in agreements between the portfolio manager, the client, and the securities dealer or bank.
- Transparency: Clients should be informed about the use of third-party entities for trade execution and any associated costs.
- Regulatory Adherence: All activities must comply with Swiss financial regulations, including anti-money laundering (AML) requirements.
When to Consider This Model
This approach is particularly beneficial for portfolio managers who:
- Do not wish to obtain a securities firm license but want to offer a comprehensive range of services.
- Prefer to focus on asset management and outsource the technical and regulatory complexities of securities trading.
- Operate in a cost-conscious manner, avoiding the high setup and operational expenses of a securities firm license.
- Seek a scalable solution that allows them to upgrade to a full license later.
Conclusion
Collaborating with licensed securities firms or banks offers a practical, cost-effective, and compliant pathway for Swiss portfolio managers to engage in securities trading. This model balances regulatory adherence with operational efficiency, making it an attractive choice for firms aiming to minimize costs while entering the securities market. As businesses grow, this model provides the flexibility to upgrade to a full securities firm license, enabling scalability and long-term success.
For expert advice on structuring your securities trading services in Switzerland, contact us at [email protected].
