Alex von Stachelkopf
Protection of rights and interests of all members of the financial market is an integral part of modern economy. In some cases most responsibility for ensuring financial order is placed on governmental agencies like, for example, in France. There are also systems where independent self-regulating professional organizations have many more powers than governmental agencies as is the case in Great Britain.
Based on the Financial Markets Supervision Act (FINMASA), in the Swiss Confederation financial markets are regulated by FINMA, a governmental Financial Market Supervisory Authority. It operates to protect rights of creditors, investors and policy holders by guaranteeing they are accorded equal opportunities in financial markets.
Achieving its main goal of protecting rights of financial market members and being absolutely independent, FINMA facilitates supporting of stability in Switzerland's financial market and ensures the reputation it enjoys.
Structure of FINMA - a guarantee of independence and competence
FINMA is an independent legislative authority that is independent functionally, institutionally and financially from other governmental agencies. Its organizational structure includes the Board of Directors, the Executive Board and a network of external auditors that report to the Federal Audit Office. FINMA's staff is made up of 350 people specializing in law, economy, mathematics, audit and accounting, investment, actuary activities.
The Board of Directors carries out strategic management, may issue instructions and directives, and is responsible for filling FINMA's budget. It may include from seven to nine people. The Board of Directors performs its immediate duties in committees made up of its members.
The employment and salary committee prepares recommendations that the Board uses as a basis when making HR decisions. The audit committee may include independent specialists as well and performs necessary functions of financial controls.
The strategic committee manages development of strategic areas of operations.
In addition, FINMA often engages consultants that specialize in a certain area to participate in the activities of the Board of Directors or the Executive Board. In most cases they are hired at early stages of development of different regulatory initiatives or strategic decisions for a more profound analysis of specific aspects of a certain area of financial activities such as, for example, risk management or legislative expert examination.
Given its name, the Executive Board serves as FINMA's executive body and carries out routine supervision of compliance with regulations, directives and instructions as well as with standards of conduct of all members of the financial market. It makes decisions regarding the granting of licenses, some HR rotations, key decisions on different levels of operation of financial markets. It also prepares materials and recommendations on different initiatives for the decision-making process at the level of the Board of Directors.
Finally, FINMA's third organizational level, the Extended Executive Board, deals with routine HR, organizational and representation issues.
Implementation of competences in regulating the financial market
FINMA is the supreme body of the government that regulates the operation of banks, insurance companies, stock exchanges, investment companies and funds. It is intended to prevent money laundering and carries out restructuring or bankruptcy of financial organizations. In addition, it supervises compliance with financial laws and conformity of financial institutions to license requirements. As a legislative body, FINMA may issue directives and rules and establish standards in the area of financial activities. At the same time decisions made by FINMA can be appealed in the Confederation's parliament.
Naturally, FINMA's regulatory activities are based on the granting of licenses to members of the financial market and supervision of compliance with license terms and conditions. In Switzerland licenses are required for insurance, banking and financial intermediary activities.
Licenses for banking and broking operations are granted by two FINMA's units: the Supervision of Wealth Management Banks and Securities Dealers and the Supervision of Retail, Commercial and Trading Banks.
Any bank or dealer that operates in the territory of Switzerland should meet license requirements. MIG Bank is quite a well-known example of such an organization. Details of compliance with license requirements can be viewed at the company's site.
Supervision of operations of financial organizations is based on the so-called dual supervisory system. It means regulatory functions are performed by both the relevant units and sections of FINMA and recognized auditing firms.
A rating of organizations is created on the basis of audits. Depending on the degree of risk and other criteria defined by auditors, all organizations are distributed by 'supervisory categories', which are only five. Based on these data FINMA establishes the regularity and procedure for supervision.
FINMASA and a number of other acts on supervision and audit in the financial market serve as the regulatory base for supervision in that it sets out main license and regulatory requirements. In addition, some standards may be included in regulatory documentations of different unions and associations. For example, methodical recommendations of the Swiss Bank Corporation were recognized by FINMA as minimum requirements to banks and securities dealers.
Alex von Stachelkopf
