Embracing the duties of market conduct compliance

The Swiss legislator has stipulated limited principle-based legal provisions to ensure the compliant market conduct of the participating financial intermediaries. Whether in relation to the duty of proper organisation and the corresponding definitions, or respective criminal provisions of the exploitation of insider information (Articles 142 & 154 FinMIA) and market manipulation (Articles 143 & 155 FinMIA) as the cornerstones of the legislation landscape.

Although stipulated in only a few legal provisions, the impact in case of non-compliance with proper market behaviour is significant. This includes financial, non-financial and, in particular, reputational risks for the offending party, the regulated entity and the Swiss financial market as a whole. To set clear regulatory expectations and guide financial intermediaries in developing an adequate framework for controlling risks related to market conduct rules, the Swiss Financial Market Supervisory Authority FINMA put the Circular on ‘Market conduct rules’ into force on 1 October 2013, with its latest amendment dated 4 November 2020 (FINMA Circular 2013/8 ‘Market conduct rules’).

A little more than a year following the amendment and the corresponding extended scope of FINMA Circular 2013/8, challenges continue to be evident in the implementation of the stipulated duties and, in particular, in the application of the risk-based approach and the principle of proportionality.

To support financial intermediaries in overcoming the challenges of adequately addressing the market conduct requirements, the following topics are discussed in our paper:

• The importance of an individual risk analysis.
• The minimum requirements for the framework of organisational duties.
• Application of the principles of a risk-based approach and proportionality.
• Overview of known challenges worth assessing individually.