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EAMs must closely monitor their cross-border activities

Friday, 17 November 2023

SPHERE by Achille Deodato, CEO Indigita SA


The regulatory environment for external asset managers (EAMs) has undergone significant changes, resulting in an expansion of their regulatory responsibilities. This trend has effectively weakened the distinction that EAMs once had from traditional banking institutions, as explained by Achille Deodato.

In Switzerland, EAMs have completed the first year under the new regulations. What are the consequences, especially regarding cross-border business?

The impacts of the FINMA regime on external asset managers are becoming increasingly apparent. Indeed, the new regulation imposes stringent requirements on EAMs regarding the management of cross-border risks. Firstly, EAMs must demonstrate that they are well-versed in the cross-border regulations of the foreign markets they target or where they have clients. This means staying updated on developments in legal regulations and ensuring compliance. Additionally, EAMs must establish a comprehensive cross-border policy outlining key principles for cross-border activities, including topics such as target markets, travel permits, and procedures for policy exceptions. Another crucial aspect of FINMA's expectations is regular training for EAM employees to ensure they are well-informed and adhere to the regulatory framework.

It doesn't stop at this regulation. New data protection regulations are now being added. What does this mean in concrete terms?

The introduction of the Federal Data Protection Act (FDPA) represents an additional focus for EAMs in the coming months. EAMs will need to review and potentially adjust their procedures for protecting personal data to align with the new legal requirements. Customers also need to be informed about these measures to ensure transparency and compliance with data protection laws. In light of these developments, EAMs face a changing regulatory landscape that requires continuous adaptation and a keen awareness of evolving regulatory standards to effectively and legally sustain their operations.

You also monitor regulations in other countries. What's happening at the European level that may be relevant to Swiss asset managers?

A notable development in this context is the initiative led by the European Securities and Markets Authority (ESMA) in collaboration with national supervisory authorities. ESMA has initiated an examination of marketing communication across various media, including social media, specifically targeting European retail clients. The investigation revolves around two central dimensions: first, an examination of companies' strategies for targeting audiences, and second, an assessment of the quality of marketing communication, including advertising materials.

The overarching goal is to ensure that publicly disseminated information is appropriate, clear, and free from misleading content, with a focus on preventing greenwashing practices. It is expected that this study will strengthen the regulatory stance of European authorities regarding marketing communication. Consequently, Swiss EAMs engaging in such communications with European clients must align their practices with the principles set forth by these authorities.

New regulations, new cross-border risks. What does this mean for Indigita's platforms?

Indigita is on a solid growth trajectory, achieving a 20% annual increase in revenue, profitability, and full-time employees. For the upcoming year, we plan to expand into new geographical markets, with a focus on Italy, France, and the United Kingdom. In 2023, we introduced a new solution for EAMs called "inApp Tax," developed in collaboration with BRP Tax SA. This tool, designed for the complex area of tax compliance, allows users to compare portfolio performance from a tax perspective in different countries. Covering all asset classes, this comprehensive tool operates as a standalone solution, making it accessible and user-friendly without the need for complex IT integration.

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