Since 2009 FINMA has stopped the activities of 66 illegally operating companies that violated financial market legislation. These cases resulted in losses amounting to 220 million francs for investors. Today FINMA is publishing a summary report on the action it is taking in its fight against illegal and fraudulent financial intermediaries. It also refers to current key areas and the way in which illegal companies operate, ultimately appealing to investors to consider their purchase decisions carefully and to only conclude transactions after thorough examination of the offer and the provider.
FINMA's core role is to protect creditors, investors and policy holders and ensure the smooth functioning of the financial markets. Besides its main activity of supervising licensed institutions, primarily banks and insurance companies, FINMA is also tasked with enforcing compliance with financial market legislation for companies providing financial services that operate without a requisite licence, yet conduct activities requiring authorisation. To combat illegal financial intermediaries, FINMA has been equipped with effective instruments under financial market law. This is demonstrated by the fact that since 2009 the supervisory authority has instigated legal proceedings in 103 cases against unauthorised financial intermediaries and has stopped the activities of a total of 66 companies operating illegally through liquidation or the initiation of bankruptcy proceedings.
Five key areas of illegal activities
In the last couple of years, FINMA identified five areas in which investors heavily invested funds with financial intermediaries operating illegally that often result in losses. They concern trading gold, shares in start-up companies, investment companies and clubs, foreign exchange dealers, and rental deposits.
A common feature of the offers made by illegal providers usually is that the returns and performance they promise are sometimes far in excess of comparable offers from conventional providers. This assumedly attracts investors in an environment in which returns on traditional investments such as savings accounts, government bonds and even shares and investment funds are relatively weak. FINMA has noticed that this tendency often coupled with subtle sales practices on the part of providers encourage Swiss, and particularly foreign investors – German investors are very often affected – to invest their saved assets with illegally active financial intermediaries.
Appeal to investors
Since FINMA does not monitor these companies on a systematic and regular basis, intervention by FINMA usually comes as a response to having been notified of irregularities and potential illegal activities, e.g. by investors who have suffered losses. By then the investors have already incurred losses and the assets invested can no longer be recovered. The losses alone for investors caused by illegal activities uncovered by FINMA since 2009 amount to a total of CHF 220 million.
FINMA is appealing to investors to consider their purchase decisions carefully and to thoroughly examine offers and providers. Clarifying whether a company is properly licensed or whether a service has already been criticised in online forums or on consumer websites is always worth the effort, because it can prevent investments being made with an illegal or fraudulent financial intermediary.
Tobias Lux, Media Spokesman, Phone +41 (0)31 327 91 71, firstname.lastname@example.org