Enforcement in the regulation of institutions
Administrative proceedings against licensed (or recognised, registered or authorised) institutions or companies typically involve investigating whether licensing requirements, organisational guidelines, due diligence requirements or other legal rules or standards have been breached in some way, thus necessitating FINMA's intervention. The specific responsibilities of executive officers, proprietors and employees of supervised companies may also be the subject of investigation.
Subordination process
FINMA is responsible for taking action against companies or individuals carrying on any form of business requiring authorisation under financial market legislation without the appropriate licence. In such cases FINMA may appoint an independent and suitably-qualified person to investigate circumstances relevant for supervisory purposes (investigating agent). Based on its own investigations or those of the investigating agent, FINMA will take such action as is necessary and practicable, up to and including the liquidation of affected companies. Where FINMA is unable to investigate the matter, is unable to make a ruling on the necessary measures or enforce such measures, for example because a company carries on its business from abroad or the affected individuals cannot be located, the companies or individuals concerned may be published on a FINMA
black list.
Regulatory enforcement by agents
FINMA is responsible for implementing financial market legislation and further regulations connected herewith. It makes the rulings required for such purpose. Within the scope of its legal duties, FINMA may appoint agents to enforce regulatory compliance. In practice, this includes appointing one or several investigating agents under Article 36 FINMASA or liquidators or liquidator in bankruptcy of a supervised company.
To enable it to select a suitable agent in specific situations, FINMA maintains a list of around 50 potential suppliers (auditors, lawyers or other individuals with experience of the law governing financial markets, insolvencies and liquidations). This list is regularly updated.
FINMA always welcomes
applications (in German) from suitably qualified individuals or companies wishing to act as agent on behalf of FINMA. Documents submitted in support of applications are reviewed once or twice a year.
The Report on SFBC-Commissioned Experts published on 20 March 2008 provides an overview of past experiences gathered in the course of the appointment of investigating agents for supervisory enforcement purposes.
Insolvency proceedings
FINMA is responsible both for commencing and conducting restructuring and bankruptcy proceedings in relation to individuals and legal entities carrying on business as a bank or as a securities dealer, for which a licence is required. It also has a right to participate in insolvency proceedings relating to insurance companies and the bankruptcy court is bound to take this right into account. Where FINMA is responsible for commencing bankruptcy or restructuring proceedings, it does not merely perform the function of judge and supervisory authority in relation to the appointed liquidators, committees of creditors and restructuring agents, but also discharges the duty of insolvency administrator. In addition, bank depositors, investors in relation to securities dealers and policyholders of insolvent insurance companies benefit from special protective provisions (cf. also:
Investor protection and
Tied assets).
As is the case with bankruptcy proceedings falling within FINMA's remit, the proceedings required for the restructuring of banks and securities dealers are distinct and separate and geared to the specific needs of the financial sector. The purpose of restructuring is to enable ailing financial institutions to continue in business or to ensure that specific services can still be provided. However, restructuring proceedings are not available if a licence has already been revoked or it is not possible to grant a retrospective licence to entities engaging in unauthorised activity.
Watch list and letter of assurance
Not all irregularities that come to FINMA's attention are investigated in detail. FINMA's primary duty is to ensure that legal standards are upheld where necessary. Accordingly, FINMA only commences administrative proceedings to investigate the extent to which individuals are responsible for supervisory irregularities if there are specific grounds for so doing. If no such grounds exist, FINMA compiles any evidence of potential malpractice submitted to it without investigating the matter or commencing administrative proceedings. The data collected is incorporated into a watch list. The watch list contains information on individuals who are employed or have been employed in the financial sector and who could potentially be appointed to a senior position at an entity supervised by FINMA. If it deems such action appropriate, FINMA will issue a letter regarding assurance of proper business conduct to such individuals. See
Frequently asked questions for further information on the assurance requirement.