Authorisation requirements for securities dealers

Securities dealers must meet a number of requirements to obtain authorisation from FINMA.

Securities dealers are companies and individuals that professionally trade in securities in their own name and for their own account on a short-term basis, buy and sell securities on the secondary market for the account of third parties, offer them to the public on the primary market or create their own derivatives and offer them to the public.

2008/05 FINMA-Rundschreiben "Effektenhändler" (20.11.2008)

Erläuterungen zum Begriff Effektenhändler

Updated: 12.08.2016 Size: 0,41  MB
Add to personal download list

Definition

The legislation on stock exchanges and securities trading distinguishes between the following categories of dealers:

  • Client dealers: securities dealers who, in a professional capacity, trade in securities in their own name for the account of clients and maintain accounts for these clients themselves or through third parties for the settlement of transactions or hold securities of these clients in safe custody themselves or through third parties in their own name.

  • Own-account dealers: securities dealers who, in a professional capacity, trade in securities for their own account on a short-term basis and achieve gross annual turnover of CHF 5 billion.

  • Market makers: securities dealers who, in a professional capacity, trade in securities for their own account on a short-term basis and maintain firm bid and offer prices in given securities permanently or on request.

  • Derivatives firms: securities dealers who, in a professional capacity, create derivatives and offer them to the public on the primary market for their own account or for the account of third parties.

  • Issuing houses: securities dealers who, in a professional capacity, underwrite securities issued by third parties on a firm basis or against commission and offer them to the public on the primary market.

Securities dealers require a licence to begin trading and are subject to prudential supervision by FINMA.

Licensing requirements

For a licence to be granted, there must be no doubt that the applicant meets or can meet all of the licensing requirements. The most important are:

  • fully paid-up minimum capital of CHF 1.5 million;

  • a business plan showing that compliance with capital adequacy and risk diversification rules can be ensured at all times;

  • qualified participants and members of ultimate strategic and executive management assure proper business conduct;

  • the articles of association, partnership agreement or regulations provide a precise factual and geographical description of the business, stating the types of securities traded, the markets they are traded on and the types of client served. The scope of the business must be compatible with the securities dealer’s finances and Organisation;

  • the institution is managed in Switzerland;

  • effective separation of internal functions – in particular trading, asset management and Settlement;

  • appropriate recording, limitation and monitoring of market, credit, default, settlement, image, reputation, operational and legal risks;

  • effective internal control system, internal audit function independent of executive management;

  • appointment of a recognised audit firm for the licensing process;

  • appointment of a recognised regulatory audit firm for ongoing supervision;

  • applicants under foreign control must guarantee reciprocal rights on the part of the countries where qualified participants are domiciled;

  • if the securities dealer is part of a financial group, it must be subject to adequate consolidated supervision by a recognised supervisory authority.

Duration of the licensing process

The licensing process for securities dealers normally takes about six months, but the duration depends on the quality and complexity of the application. In the case of applications with a foreign connection, the time it takes to receive a response from the competent foreign supervisory authorities must also be taken into account.

Contact for questions on the licensing process

The Authorisation section of the Banks division (authorization@finma.ch)