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Frequently Asked Questions

Practice of the SRO PolyReg for Working Processes and Procedures

Zurich, 31 August 2009

Thank you for your interest in SRO PolyReg!

The following overview will give you answers to frequently asked questions all around becoming a member of the association and also the rights and duties of members of SRO PolyReg.

For the purposes of a guide, it therefore serves both future and existing members to carry out the daily activities of the association efficiently and smoothly. The overview defines the provisions of the Statutes and Regulations as well as explains the practice of SRO PolyReg (and the Arbitral Tribunal) regarding the daily activities of the association. In addition, questions about the subordination of asset managers to the Code of Professional Conduct of PolyReg are included in the list of questions. The list is updated periodically.

Yours sincerely,

Matthias Schaad, Managing Director

Summary:

Preliminary Questions / Publicity
  1. Where can I find details of the members affiliated to SRO PolyReg? Can a list of members be viewed on the Internet?

  2. Where can I find details on the asset managers of SRO PolyReg regulated by the Code of Professional Conduct (PolyAsset asset managers)? Can a list of these asset managers be viewed on the Internet?

  3. C Does SRO PolyReg disclose information about its members, for example about sanction proceedings and similar?

  4. What is SRO PolyReg and what is its responsibility?

B. SRO PolyReg: Membership Requirements
  1. Who is eligible for membership of SRO PolyReg?

  2. What makes me a financial intermediary? How can I learn whether my activities are subject to the MLA?

  3. What other requirements must the members fulfill?

  4. I am currently not active as a financial intermediary, but I can imagine to start activities subject to supervision in due time. Can I join SRO PolyReg before this time for reasons of precaution?

  5. I work as a consultant, but my business partners demand that I am a member of a SRO. Can I join SRO PolyReg under these conditions?

  6. I live abroad (for example in Germany) and am the owner of a company with legal domicile in Switzerland that provides financial services subject to supervision here. From time to time I visit Switzerland and monitor the managing director acting on my behalf, who handles the administration and customer correspondence, while I am responsible for decisions regarding customer transactions. Can I join SRO PolyReg under these conditions?

C. PolyAsset: Questions regarding Regulation by the Code of Professional Conduct
  1. I/my company am/is active as asset manager. Must I/my company be subject to the Code of Professional Conduct of SRO PolyReg?

  2. I/my company subject/s myself/itself to the Code of Professional Conduct of SRO PolyReg, and consequently have/has to meet increased requirements and costs. Will this be discernible to my (future) customers? Is there a (quality) label?

  3. I want to subject myself/my company as asset manager to the Code of Professional Conduct of SRO PolyReg. What requirements must I meet?

  4. At what time can I subject myself/my company as asset managers to the Code of Professional Conduct of SRO PolyReg?

  5. As a member of SRO PolyReg and asset manager, can I subject myself to the Code of Professional Conduct of a different professional organisation other than SRO PolyReg, as long as it is also recognised by FINMA?

D. SRO PolyReg: Acceptance Procedure
  1. What is the acceptance procedure of SRO PolyReg?

  2. How long does the admission procedure take?

  3. Is there an expedited procedure?

  4. Can I expedite the admission procedure by visiting the offices of SRO PolyReg in person?

  5. What does membership of SRO PolyReg cost?

  6. How is the fee classification calculated?

  7. What further costs can I expect?

E. Questions regarding the PolyReg application
  1. What is a reference? Who can provide references?

  2. Which MLA functions does SRO PolyReg recognise? Why must the functions be manned? Which requirements must functionaries fulfill?

  3. Can one and the same person man the MLA functions?

  4. What documentation requirements must association officers, members of management, executives and signatories fulfill?

  5. The financial statements of my company are not audited by an auditing agency. Is this permitted and will it create problems for SRO PolyReg?

  6. Which documentation requirements must employees fulfill that are not signatories or association officers?

  7. My company works with agents. Which documentation requirements must they fulfill?

  8. I personally want to take the responsibility for the MLA-relevant training (application of page 14 according to article 39 paragraph 4 of the Statutes). What exactly does this entail?

  9. 16 I want my inspection agency to carry out the MLA inspections (application of page 14, according to article 34 paragraph 1 of the Statutes). What exactly does this mean?

  10. What is evidence of the fact that the own inspection agency is competent in all MLA matters and meets the requirements of article 33 paragraph 2 of the Statutes?

  11. Which information is required on page 15 of the admission application?

  12. Which documentary requirements are associated with the role of a MLA functionary?

  13. My admission application has been rejected. What can I do?

F. PolyAsset: Questions regarding the Code of Professional Conduct / subordination procedure
  1. I want to subject myself/my company as asset manager to the Code of Professional Conduct of SRO PolyReg. How do I proceed?

  2. Why are there two Regulations in the area of the Code of Professional Conduct? Which do I have to adhere to?

  3. Which details are required in the subordination declaration?

  4. What is the purpose of page 7 of the subordination form?

  5. What requirements does a professional inspection agency have to fulfill?

  6. What relationship do the professional and the MLA inspection agency have?

  7. How long does the professional subordination procedure take?

  8. Is there an expedited procedure?

  9. Can I accelerate the subordination procedure by visiting SRO PolyReg's offices in person?

  10. I am not sure whether my asset management contracts fulfill the requirements of the Code of Professional Conduct. What can I do?

  11. My subordination application has been rejected. What can I do?

G. SRO PolyReg: Questions regarding consequences and modalities of membership
  1. What happens to my data submitted to SRO PolyReg?

  2. I want to join SRO PolyReg as a passive member. Is that possible?

  3. I know that SRO PolyReg recognises inactive members. What is inactivity and how do I become an inactive member?

  4. Which periods apply to the association year for me as a member?

H. SRO PolyReg: Maintaining and ending the membership
  1. I have just been accepted as a member of SRO PolyReg. What do I have to do now?

  2. Where can I review my responsibilities, in case I forget?

  3. What are my duties as a member of SRO PolyReg?

  4. What are my rights as a member of SRO PolyReg?

  5. How does membership of SRO PolyReg end?

I. SRO PolyReg: Inspections
  1. How often will I be inspected? And what role does inactivity play in this?

  2. What is a deferred inspection? How can I obtain this?

  3. What is the ordinary inspection procedure?

  4. What is the purpose of the inspection?

  5. What is an extraordinary inspection?

  6. Who carries out an extraordinary inspection? What is the procedure?

  7. What are the costs of such inspections?

J. PolyAsset: Questions regarding regulation by the Code of Professional Conduct / inspections
  1. Is there a deferral for the Code of Professional Conduct inspection as there is for SRO PolyReg?

  2. What is the ordinary inspection procedure?

  3. What is the purpose of the inspection?

  4. What is an extraordinary inspection?

  5. Who carries out an extraordinary inspection? What is the procedure?

  6. What are the consequences of qualifications identified during such inspections?

  7. What are the costs of such inspections?

K. SRO PolyReg: Sanctions and arbitral tribunal
  1. When does SRO PolyReg resort to the instrument of sanctions?

  2. What sanctions are possible?

  3. How are fines calculated?

  4. What causes the exclusion from SRO PolyReg?

  5. What is the procedure?

  6. What consequences do sanction proceedings have with regard to the Swiss Financial Market Supervisory Authority FINMA?

  7. Which legal form do the sanction proceedings of SRO PolyReg have and which procedural principles are applied?

  8. What do sanction proceedings cost?

  9. Which remedies exist against sanction decisions of SRO PolyReg?

  10. What is the function of the arbitration officer?

  11. What is the procedure of the arbitral tribunal?

  12. What about the suspensive effect of appeals? What are the consequences of lifting the suspensive effect?

  13. What are the costs of arbitration proceedings?

Preliminary Questions / Publicity

  1. Where can I find details of the members affiliated to SRO PolyReg? Can a list of members be viewed on the Internet?

    The list of members of SRO PolyReg is not published according to a resolution of a general meeting in 2004. This will apply as long as the FINMA (Swiss Financial Market Supervisory Authority) has not yet published its publication of all regulated financial intermediaries in Switzerland (to which is not yet entitled according to FINMAG).

    Until then, interested parties can enquire after the regulation status of a member either directly from SRO PolyReg or obtain a membership confirmation from the member him-/herself.

    Members are at any time able to produce a membership confirmation either themselves or on-line using the homepage of SRO PolyReg (in German, French, Italian or English). As the recipient of such a confirmation, you can check its genuineness also on-line. Checks of on-line membership confirmations also indicate the up-to-dateness of memberships that have once been confirmed.

  2. Where can I find details on the asset managers of SRO PolyReg regulated by the Code of Professional Conduct (PolyAsset asset managers)? Can a list of these asset managers be viewed on the Internet?

    Publication of the PolyAsset asset managers on the Internet is planned. In addition, investors will be able to obtain disciplinary information on PolyAsset asset managers or report breaches of the Code of Professional Conduct (see however question C.2!). The technical implementation is currently pending.

  3. C Does SRO PolyReg disclose information about its members, for example about sanction proceedings and similar?

    No. Internal matters of the association SRO PolyReg are subject to data protection and not public. The same applies to media enquiries.

  4. What is SRO PolyReg and what is its responsibility? SRO PolyReg is a self-regulatory organisation, recognised by FINMA, which monitors and enforces the implementation of due diligence of the Swiss Federal Act on the Prevention of Money-Laundering in the Financial Sector (MLA) by its members. SRO PolyReg does not however aim to achieve the protection of investors, since the MLA itself has not been designed to protect investors. Therefore, SRO PolyReg does not exercise prudential supervision of its members.

    Only with regard to the asset managers regulated by the Code of Professional Conduct (PolyAsset asset managers), SRO PolyReg also acts as a professional association. Supervision of the compliance with the Code of Professional Conduct that is equally recognised by FINMA by the persons subject to them is a part-prudential supervision.

B. SRO PolyReg: Membership Requirements

  1. Who is eligible for membership of SRO PolyReg?

    Membership is open to persons or legal entities who offer services as a financial intermediary within the scope of article 2 paragraph 3 MLA, having their legal domicile, a branch office or place of operation in Switzerland (article 3 paragraph 1 of the Statutes). Domicile companies cannot become members of SRO PolyReg.

    Domicile companies are persons not having their own staff and not being commercially active. A person is equally considered a domicile company by SRO PolyReg, if their centre of actual administration and business activity is located outside of Switzerland, in particular if the activity carried out would be subject to a duty to be regulated there (see question B.6).

  2. What makes me a financial intermediary? How can I learn whether my activities are subject to the MLA?

    If article 2 paragraph 3 MLA does not immediately clarify this question, FINMA (Swiss Financial Market Supervisory Authority) will advise you on the duty of supervision. FINMA's practice is summarised and can be viewed in the so-called Unterstellungskommentar (Commentary on subordination) in the Archive on the FINMA web site.

    Whoever carries out activities that must be subject to supervision must either subject themselves directly to FINMA or join a SRO, if the activity is carried out professionally. The answer to the question of professionalism depends on the Regulations of the Swiss Financial Market Supervisory Authority regarding the performance of financial intermediation within the meaning of the Money Laundering Act (VBAF-FINMA; SR 955.20).

  3. What other requirements must the members fulfill?

    Members themselves and all persons or employees working for them in the domain of financial intermediation must enjoy a good reputation with regard to their activity as financial intermediaries and be able to guarantee fulfilment of their obligations under the MLA and the Regulations. Furthermore, members are obliged to conduct their activity at all times in accordance with the object laid down in the Statutes. This article prohibits any forbidden (illegal) activity, in particular the performance of activities subject to authorisation without existing corresponding authorisation, but equally unethical business practices (article 4 paragraph 1 of the Statutes).

  4. I am currently not active as a financial intermediary, but I can imagine to start activities subject to supervision in due time. Can I join SRO PolyReg before this time for reasons of precaution?

    No. SRO PolyReg does not accept "possible future members". Without activities currently subject to supervision or at least the intention to start activities subject to supervision within a reasonable period of time, which is evidenced by appropriate documents in the application, there is no possibility to become a member (see question B.1).

  5. I work as a consultant, but my business partners demand that I am a member of a SRO. Can I join SRO PolyReg under these conditions?

    In cases like this, SRO PolyReg can approve a membership as an exception. However, applicants with the appropriate background must follow the proper admission procedure (see question D.1). The material warranty of the applicants will be examined the same way as if they were financial intermediaries according to article 2 paragraph 3 MLA. Within the scope of the admissibility laid down in the Statutes and Regulations, duties can be relaxed.

  6. I live abroad (for example in Germany) and am the owner of a company with legal domicile in Switzerland that provides financial services subject to supervision here. From time to time I visit Switzerland and monitor the managing director acting on my behalf, who handles the administration and customer correspondence, while I am responsible for decisions regarding customer transactions. Can I join SRO PolyReg under these conditions?

    No. The Swiss company will be regarded a domicile company by SRO PolyReg, which cannot become a member. In addition, the company will be considered a vehicle performing MLA-relevant activities outside the territorial validity of the MLA, whose activities could result in the actual business activity virtually eluding the supervision of SRO PolyReg or at least the supervision of responsible foreign authorities. This would constitute a risk of Regulations evasion, which SRO PolyReg will not tolerate (see question B.1).

C. PolyAsset: Questions regarding Regulation by the Code of Professional Conduct

  1. I/my company am/is active as asset manager. Must I/my company be subject to the Code of Professional Conduct of SRO PolyReg?

    It is obligatory to be subject to these Regulations for asset managers wanting to benefit from the statutory privileges of article 6 paragraph 2 CISO (Collective Investment Schemes Ordinance) or (from 1 October 2009) publicly advertising for collective investments and structured products not approved for public distribution. The term public advertising is defined in FINMA's circular 2008/08 and extensively interpreted by the authority. It comprises – under certain conditions – all activities suitable to inform the public, in particular non-qualified investors according to CISA, about collective investments and structured products not approved for public distribution in Switzerland, and therefore it comprises also mere consultation.

    Whoever therefore wants to avoid conflicts with FINMA regarding "public advertising", must either refrain from such activities from 1 October 2009 or have a distributor licence of FINMA or subject themselves – in the case of asset managers – to a Code of Professional Conduct recognised by FINMA, such as the one of SRO PolyReg. Thus subordination to supervision is a business-strategic decision of the asset manager with corresponding consequences for supervision and conduct.

    The supervision results in a (partly) prudential supervision in addition to and independent of the MLA check to be carried out.

  2. I/my company subject/s myself/itself to the Code of Professional Conduct of SRO PolyReg, and consequently have/has to meet increased requirements and costs. Will this be discernible to my (future) customers? Is there a (quality) label?

    Non-subordination limits the asset manager's capacity to act regarding the distribution of collective investments and structured products not approved in Switzerland. However, on its own it does not allow conclusions regarding the quality of service provided by a non-subordinated asset manager within the scope of his permitted activities.

    Conversely, it is planned to award asset managers, meeting the Regulations requirements of SRO PolyReg and subjecting to the Code of Professional Conduct, the label "PolyAsset", which indicates that the asset manager is subject to the Code of Professional Conduct of SRO PolyReg and that checks show that he fulfills it (constantly).

    Customers must be notified of the subordination to the Code of Professional Conduct. A copy of the PolyReg Code of Professional Conduct must be given to customers upon conclusion of any contract. PolyAsset asset managers will also receive labels for use on their business stationery and/or web sites.

    In addition, the Regulations regarding control and sanction of the Code of Professional Conduct explicitly envisage the publication of regulated PolyAsset asset managers.

  3. I want to subject myself/my company as asset manager to the Code of Professional Conduct of SRO PolyReg. What requirements must I meet?

    You/your company must be a member of SRO PolyReg and guarantee compliance with the Code of Professional Conduct.

  4. At what time can I subject myself/my company as asset managers to the Code of Professional Conduct of SRO PolyReg?

    The subordination can be applied for at the same time as applying for membership of SRO PolyReg (the procedure however is separate) or later. Asset managers who are already members of SRO PolyReg and are subjecting themselves before 30 September 2009, must at that point in time be able to offer new customers asset management contracts that comply with the Code of Professional Conduct, and will benefit from a transition period until 31 December 2010 to adapt contracts with existing customers. If need be, this transition period will also apply to subordinations after 30 September 2009, according to FINMA (see question F.1).

  5. As a member of SRO PolyReg and asset manager, can I subject myself to the Code of Professional Conduct of a different professional organisation other than SRO PolyReg, as long as it is also recognised by FINMA?

    Yes. However, SRO PolyReg must be notified of the subordination to a third party. Furthermore, the respective professional organisation must be given comprehensive power of disclosure to SRO PolyReg, particularly since breaches of a Code of Professional Conduct are capable of calling into question the guarantee of a financial intermediary to provide ethically and legally irreproachable financial services, which in turn could affect the membership requirements of SRO PolyReg.

D. SRO PolyReg: Acceptance Procedure

  1. What is the acceptance procedure of SRO PolyReg?

    The admission procedure proceeds exclusively in written form, is interactive and has two stages. It begins with the submission of a complete application by mail. SRO PolyReg will immediately confirm receipt of the application. Simultaneously, the application will undergo an initial check for classification into the fee categories according the PolyReg fee scale, and the one-off so-called registration fee will be invoiced.

    After payment of this registration fee, during the first stage the application will be officially checked for completeness and compliance with form. Missing documents and/or incomplete information will be requested again and a period of time will be fixed for this. Applicants must consider that the application is - so to speak - the basic dossier of members, which will accompany them during the entire term of their membership and which must be kept constantly updated by the member after the acceptance (see question H.3). Therefore, the application should be prepared in a legible form, it may however be prepared in handwritten form.

    As soon as the complete application is received, it will be materially checked during the second stage. This check is designed to determine whether the applicant as financial intermediary promises to provide guarantee for the fulfillment of the obligations under the MLA and the Regulations of SRO PolyReg and to provide in particular ethically and legally irreproachable financial services of high quality in accordance with article 2 paragraph of the Statutes. If this check results in questions or uncertainties, the applicant will be notified in writing and given a period of time within which to answer them in writing.

    If there are no objections – or if these are dispelled by explanations of the applicant – the executive board will decide on the admission. The decision will be sent as an acceptance confirmation in writing or – in case of rejection – in a written decision giving reasons for the rejection, which can be appealed in the arbitral tribunal (see questions K.9 and K.11). If the application is accepted, the annual fee for the current year will become due.

  2. How long does the admission procedure take?

    The procedure is designed in such a way that a decision should be reached within 2 days to 2 weeks from receipt of the complete application. It must be pointed out that an additional request for missing documents or answers to questions of the material check procedure (2nd stage) can result in significant delays in this assessment.

  3. Is there an expedited procedure?

    No.

  4. Can I expedite the admission procedure by visiting the offices of SRO PolyReg in person?

    No. Of course, we would love to meet you, but the thorough official and material check of applications is a legal obligation of SRO PolyReg and must be fulfilled regardless of whether you are pressured for time. The application check – in combination with the administrative processing – will necessarily take a certain amount of time.

  5. What does membership of SRO PolyReg cost?

    The costs are dependent on the size of the company (see question D.6). The classification of fee categories is based on the fee scale of SRO PolyReg. Members who carry out their financial intermediary activity not only part time (i.e. a mainly MLA-relevant activity) will incur non-recurring costs as a check fee in addition to the registration fee when they become members. These costs will amount to CHF 900.00 to 3,600.00, depending on the size of the company.

    After acceptance as a member the annually recurring costs (annual fee) will amount to CHF 1,200.00 to 4,800.00, depending on the company size .

    For members with companies of size 4 (28 or more staff) individual rates are agreed, which however will not exceed the lower limit of CHF 7,200.00 for the registration fee and CHF 9,600.00 for the annual fee.

    Inactive members pay a lump sum of CHF 650.00 as membership fee (see questions B.4 and G.3)

  6. How is the fee classification calculated?

    In accordance with the fee scale, the fee is calculated (accumulatively) on the basis of the number of executives and staff fulfilling MLA-relevant tasks, be it alone or collectively. Double counts are avoided.

  7. What further costs can I expect?

    Within the scope of SRO PolyReg, additional costs, besides the membership fee, are generated by the annual MLA inspections and the duty to train. Inspections by PolyReg inspection agencies are invoiced at a standard hourly rate of CHF 240.00. If inspections are carried out by your own inspection agencies (as an exception), their tariffs will apply (see question I.7).

    Per employee, the basic training course costs CHF 650.00, the annual further training courses cost CHF 340.00 (see question H.3).

    If you subject yourself as asset manager to PolyReg's Code of Professional Conduct, this will incur an annual flat fee of CHF 800.00.

E. Questions regarding the PolyReg application

  1. Regarding page 2: What is a reference? Who can provide references?

    With a reference a third party guarantees the trustworthiness of an applicant to SRO PolyReg. These references can be given by various sources, by the applicant's principal bank, a depositary bank, business partners or personal referees.

  2. Regarding pages 4, 11, 12 and 15: Which MLA functions does SRO PolyReg recognise? Why must the functions be manned? Which requirements must functionaries fulfill?

    SRO PolyReg demands of its members that certain central areas of responsibility, which appear necessary for the internal enforcement and implementation of the duties under the MLA, must be manned permanently. SRO recognises the functions of a contact, the responsible person for dossier management, for reporting to the MROS and freezing of assets and the person responsible for training (see application, pages 4, 11, 12 and 15).

    The contact is considered the central point of contact for SRO PolyReg, who can receive instructions for the member with legal effect and can enforce their internal implementation in the member's organisation. The contact should be proficient in at least one of the official languages. With a view to possible arbitration proceedings, signatory power, registered in the register of companies, is also required.

    The dossier manager is responsible for the correct management of the customer documentation and is considered their owner, so to speak. In view of the territorial validity of the MLA and in order to ensure the documents' availability to criminal prosecution authorities, SRO PolyReg demands that the functionary is resident in Switzerland and that the documents are always available from him.

    The person responsible for reporting must ensure that reports of members are forwarded to the MROS, that possible freezing of assets is enforced and that SRO PolyReg is notified of the members' reports when the assets have been released.

    At least the person responsible for training must attend the PolyReg training courses. He ensures internally that employees have sufficient knowledge of the MLA.

  3. Can one and the same person man the MLA functions?

    Yes. In this case however, this person must not be resident abroad (see questions B.6 and E.2).

  4. Regarding pages 8 and 16: What documentation requirements must association officers, members of management, executives and signatories fulfill?

    In practice this means all persons entered as signatories into the register of companies, as well as persons having individual power of attorney on behalf of the applicant/member. They are able to exercise rights and duties on behalf of the applicant/member, in particular in view of the performance of activities of a financial intermediary. For each of these persons, page 8 of the application must be completed.

    Otherwise, the documentation requirements are identical to those of the MLA functionaries (see question E.12). In the case of multiple roles, the personal documentation must only be submitted once.

  5. Regarding page 9: The financial statements of my company are not audited by an auditing agency. Is this permitted and will it create problems for SRO PolyReg?

    If your company meets the legal requirements, it can dispense with a limited audit. In this case, do not complete page 9, and explain the reason for opting out instead.

    If you have auditors, they must be entered on this page, and the details must be documented with the enclosures requested in the application.

    This does not pose a problem for ensuring the MLA inspection. In general, SRO PolyReg appoints a MLA inspection agency for all members, unless the board approves a member's application according to article 34 paragraph 1 of the Statutes, to commission its own inspection agency with MLA inspections (see question E.9).

    If such an application is filed within the framework of the admission application, it must be accompanied by a declaration of acceptance of mandate of the inspection agency stated on page 9. If such an application is filed at a later time, this declaration of acceptance of mandate must be submitted at the same time.

  6. Regarding page 10: Which documentation requirements must employees fulfill that are not signatories or association officers?

    For each of these persons page 10 must be completed. In case of larger numbers of such employees, the personal details can be submitted on a separate list or on disc in Excel format.

  7. Regarding page 10: My company works with agents. Which documentation requirements must they fulfill?

    Agents can be employed as auxiliary staff and are therefore subject to the Regulations of their employer – without having to join a SRO as financial intermediary themselves – if they have been selected carefully, if their training regarding the MLA is assured and if they are contractually bound only to this employer.

    In practice, SRO PolyReg treats these agents in the same way as employees of the financial intermediary and demands for each agent the completed page 10. Due to the exceptional position of agents caused by the supervisory distance of agents to SRO PolyReg, SRO PolyReg demands of the employer to submit additionally per agent a Criminal Records Bureau check, a signed and dated copy of the passport or identity card, a copy of the respective agency contract and a quarterly updated list of agents. This list must be submitted without special request.

  8. Regarding page 14: I personally want to take the responsibility for the MLA-relevant training (application of page 14 according to article 39 paragraph 4 of the Statutes). What exactly does this entail?

    In this case, you yourself are taking responsibility to train yourself and your employees further in matters of the MLA. For this you gain your knowledge by yourself and independent of the training courses of SRO PolyReg. This means: You do not attend the further training courses of SRO PolyReg and then share your knowledge internally, but you substitute the training course of SRO PolyReg in an appropriate manner and by identifying sources yourself. In SRO PolyReg's terminology this is called in-house training.

    Generally, members are obliged to attend the training courses of SRO PolyReg (article 39 paragraph 2 of the Statutes). SRO PolyReg organises these according to article 39 paragraph 1 of the Statutes, spread across the calendar year as several basic and further training courses (in different languages). The training concept includes an all-day basic training event and half-day further training courses. In-house training is possible for the further training level. SRO PolyReg always remains in charge of the basic training.

    In order to receive approval of in-house training, you must – within the framework of an application according to article 39 paragraph 4 of the Statutes – submit a training programme showing how you will identify sources and handle information distribution. Another requirement is the appointment of an internal training officer capable of carrying out the duty of identifying sources. This can be the same person as the MLA functionary or the training officer, according to page 12 of the admission application.

    If the executive board approves such an application, SRO PolyReg will monitor the implementation of the submitted training programme within the scope of the MLA inspections. Non-implementation will be sanctioned in the same way as failure to attend SRO PolyReg's training events themselves (see questions K.1 and K.2).

    The request can already be made in the admission application by ticking the corresponding box on page 14 of the admission application, but also at a later time.

  9. Regarding page 14: 16 I want my inspection agency to carry out the MLA inspections (application of page 14, according to article 34 paragraph 1 of the Statutes). What exactly does this mean?

    Usually, SRO PolyReg will allocate MLA inspection agencies to the members. As an exception, for the purposes of article 34 paragraph 1 of the Statutes a member's application can be approved that the inspection agency of the member itself carries out the MLA inspection. This right however is only open to members with an inspection agency entered into the register of companies. Opting out rules out such an application or (automatically) renders a previously approved application obsolete.

    There is no room for arbitrariness. If an inspection agency specially requested by a member is supposed to be commissioned, this agency must be entered into the register of companies of the applicant as inspection agency. A third inspection agency cannot be chosen. In all cases where the member's own inspection agency will not be commissioned to carry out the MLA inspection, SRO PolyReg will appoint an inspection agency.

    The request can already be made in the admission application by ticking the corresponding box on page 14 of the admission application, but also at a later time.

  10. Regarding page 14: What is evidence of the fact that the own inspection agency is competent in all MLA matters and meets the requirements of article 33 paragraph 2 of the Statutes?

    The competence is proven by either the inspection agency demonstrating that it is accredited by FINMA for MLA inspections or by proven mandates as MLA inspection agency for other SROs.

    The inspection agency is responsible for ensuring that the persons actually commissioned with carrying out the inspection are competent. It initially confirms this to SRO PolyReg by means of a written declaration of acceptance of the mandate.

    The requirements of independence are based on the recognised directives on the independence of the sector.

  11. Regarding page 15: Which information is required on page 15 of the admission application?

    The information on page 15 must be identical in content with that on pages 4, 11 and 12. Additionally, the page must be signed and dated by the authorised signatory of the financial intermediary and again signed and dated by all named functionaries.

  12. Regarding page 16: Which documentary requirements are associated with the role of a MLA functionary?

    Since the MLA functionaries are almost guarantors of a member, they are more exposed in terms of monitoring than ordinary employees of the member. Therefore, SRO PolyReg requests extended personal documentation of the MLA functionaries within the scope of the admission application. This documentation consists of the correctly completed page 16 of the admission application, a current criminal record extract, a signed and dated copy of the passport or identity card, curriculum vitae and at least one certificate documenting the curriculum vitae. If new MLA functionaries are appointed during the term of membership, the same documentation will be required for the new functionaries.

  13. My admission application has been rejected. What can I do?

    If you are not satisfied with the executive board's written and reasoned decision, you have the right to appeal to the PolyReg arbitral tribunal (article 6 paragraph 3 and article 37 paragraph 1 of the Statutes). 1 of the Statutes). You will have 10 days from the notification of the disputed decision to appeal in writing to the arbitration officer, Dr. Georg Lechleiter, Delphinstrasse 5, 8008 Zurich (the date of the postmark shall be evidence of the timely receipt). A mere application suffices. Grounds are not necessary initially. The arbitration officer will request these separately and with a set time limit.

    The arbitration officer is responsible for directing the course of the proceedings up to the point at which the written grounds of appeal and the response to the appeal have been presented. He sets the relevant time limits for you and SRO PolyReg and warns the parties of the consequences of failing to meet them, as well as collects the registration fee, which for this procedure is set at CHF 2,000.00 (article 37 paragraph 7 of the Statutes; see question K.13).

    The arbitral tribunal has full freedom to examine contested decisions (article 38 paragraph 5 of the Statutes). Its decisions are final (article 35 paragraph 2 of the Statutes and judgement of the Cantonal Court of the Canton of Zurich, published in ZR 104 no. 47).

    Appeals against decisions to reject membership applications however do not have suspensive effect. The time limits of the subordination period, according to art. 11 paragraph 1 lit. b of the so-called Bagatellverordnung (VBAF-FINMA; SR 955.20), are not affected by this.

F. PolyAsset: Questions regarding the Code of Professional Conduct / subordination procedure

  1. I want to subject myself/my company as asset manager to the Code of Professional Conduct of SRO PolyReg. How do I proceed?

    You/your company must submit the completed registration form "Subordination to the Code of Professional Conduct".

    The submission will start a review procedure that is separate from the admission procedure. However, the subordination declaration can be submitted at the same time as the admission application to SRO PolyReg. But the decision to accept the subordination can only be made when the admission as SRO member has been decided, though this decision can also be made simultaneously.

    Furthermore, the subordination application can be submitted at a later date. Here the issue of the transition period must be considered (see question C.4)

  2. Why are there two Regulations in the area of the Code of Professional Conduct? Which do I have to adhere to?

    There are two Regulations in the area of code of professional conduct because different areas must be regulated. Both must be adhered to.

    The "Code of Professional Conduct" for asset managers is based on the FINMA circular 2009/01 and defines the standards of conduct of asset managers in their relationship with their customers. In PolyReg's terminology this is called Code of Professional Conduct.

    The "Regulations for control and sanctions of the Code of Professional Conduct" define the relationship of regulated asset managers with SRO PolyReg as the professional association. In PolyReg's terminology they are called Control Regulations (short: RKSS).

  3. Regarding the subordination form, pages 1-6 (excluding page 5): Which details are required in the subordination declaration?

    In terms of content, the details are the same (if possible) as the ones on pages 2, 3, 4 and 16 of the SRO admission application.

  4. Regarding the subordination form, page 7: What is the purpose of page 7 of the subordination form?

    The inspection concept for the check of compliance with the Code of Professional Conduct stipulates that regulated asset managers appoint their own professional inspection agency (article 9 paragraph 1 Control Regulations). This agency must be named to SRO PolyReg on page 7; SRO PolyReg reserves the right to veto the selection. In addition, this form page contains a standard mandate acceptance declaration of this inspection agency.

  5. What requirements does a professional inspection agency have to fulfill?

    The professional inspection agency must be formally and materially independent of the regulated asset manager. Due to the required content of the professional inspection (article 12 Control Regulations), a professional inspection agency must be an audit expert with relevant experience for the purposes of art. 4 of the Audit Control Act (RAG; RS 221.302). Once selected, a member can only replace one professional inspection agency with another for important reasons.

  6. What relationship do the professional and the MLA inspection agency have? According to article 9 paragraph 3 of the Control Regulations, the professional inspection agency may be identical with the auditor according to stock corporation law or with the MLA inspection agency of the asset manager (see question E.9).

    But it must be noted that different contractual relations are entered into: MLA inspection agencies are always appointed by SRO-PolyReg to carry out a MLA inspection, even if they are member-specific inspection agencies (= auditors) of the members. However, professional inspection agencies are directly and exclusively appointed by the regulated asset manager for the professional inspection.

    While PolyReg's MLA inspection agencies normally carry out inspections for standardised fees based on a framework agreement with SRO PolyReg, SRO PolyReg as a professional association does not exercise any influence on fees regarding the professional inspection.

  7. How long does the professional subordination procedure take?

    The procedure is designed in such a way that a decision should be reached within 2 days to 2 weeks from receipt of the complete application.

  8. Is there an expedited procedure?

    No.

  9. Can I accelerate the subordination procedure by visiting SRO PolyReg's offices in person?

    No (see question D.4).

  10. I am not sure whether my asset management contracts fulfill the requirements of the Code of Professional Conduct. What can I do?

    You can send us your standard contracts for preliminary evaluation.

  11. My subordination application has been rejected. What can I do?

    Nobody is entitled to be subordinated to the Code of Professional Conduct. Any appeals are subject to the provisions of the Statutes (art. 6 paragraph 2 RKSS).

G. SRO PolyReg: Questions regarding consequences and modalities of membership

  1. What happens to my data submitted to SRO PolyReg?

    SRO PolyReg collects and administers the legally required data concerning its members and its own activities, carries out inspections to check compliance with the legal Regulations, and issues the reports required in accordance with the MLA and the instructions of the control authority (article 2 paragraph 3 and article 17 of the Statutes).

    This can result in a data exchange with FINMA within the legally required scope. In addition, SRO PolyReg strictly adheres to the provisions of the data protection act and treats all data confidentially. This means in particular that SRO PolyReg does not disclose any internal association information, not to members of the association nor to outsiders (article 17 paragraph 2 of the Statutes).

    Individual enquiries from third parties regarding the confirmation of membership will however be answered. The list of members of SRO PolyReg is not public, due to a MLA decision. FINMA however will in the foreseeable future publish a list of all regulated financial intermediaries directly for interested parties (on demand).

    SRO PolyReg manages a publicly accessible list of professionally regulated asset managers. In addition, codes of professional conduct also explicitly prescribe the disclosure of disciplinary information to third parties. This disclosure however does not extend to information collected within the framework of SRO PolyReg or connected with its activities.

  2. I want to join SRO PolyReg as a passive member. Is that possible?

    No. SRO PolyReg does not recognise passive membership (see questions B.4 and G.3).

  3. I know that SRO PolyReg recognises inactive members. What is inactivity and how do I become an inactive member?

    Inactive members are members that declare bindingly before the end of the calendar year by submitting a form declaring inactivity, that they will not be professionally active for the purposes of the Bagatellverordnung (VBAF-FINMA; SR 955.20) as financial intermediaries for the duration of the coming calendar year. The timely submission of the form ensures that the member will pay a reduced membership fee for the coming calendar year (flat rate of CHF 650. 00) and be dispensed automatically from the annual training duty.

    This status of inactivity however does not affect the duty of inspection: Even inactive members are normally inspected annually. This inspection mainly serves to verify the actual inactivity that until that time has only been declared prospectively. If the inspection shows that a member is professionally active as a financial intermediary in spite of this declared inactivity, the member will instantly be re-activated and the difference between his/her reduced member's fee and the normal member's fee will be invoiced. Equally the training duty for the current calendar year will be renewed immediately.

    In addition it should be considered that SRO PolyReg does not accept inactivity declarations during the first year of membership (no possibility of indirect passive membership) and will only agree to such declarations of new members who join during the year, if they at least have fulfilled the duty of basic training of article 39 paragraph 2 of the Statutes in conjunction with article 60 paragraph 3 of the Regulations and have passed the first inspection (see questions H.3 and I.2).

    Furthermore, a submitted inactivity declaration is not infinitely valid and only accepted for the respective calendar year. It is the member's responsibility to submit the inactivity declaration on time (if necessary regularly). Belated declarations will not be accepted, even if factual inactivity exists.

  4. Which periods apply to the association year for me as a member?

    SRO PolyReg is organised in such a way that its statutory services interact as best as possible with the requirements of its members' business routine. Members must fulfill recurring requirements. These are subject to the following cycles:

    The fee year is the calendar year, independent of the time of joining or withdrawal of a member. It is not invoiced pro rata temporis, because SRO PolyReg has to pay FINMA an annual supervision fee – based on the number of members as of 31 December of a calendar year, but independent of their size, level of activity and number of files. Therefore, it is appropriate to charge the full fee to withdrawing members, who as of 1 January of the following calendar year were still members, and also to members, who join during the year.

    The proportional costs of the supervision fee are currently CHF 350. 00 on average per member. These are however not passed on to the members separately, but are already included in the membership fee.

    The training year is the calendar year. It must be taken into consideration that in January of a training year regular "catch up" trainings are organised and carried out as an additional service for previously defaulting members, which will be attributed to the previous training year and just ended calendar year. Participation in such a training course does not release members from their responsibility to carry out training during the already started calendar year (see question H.3).

    The inspection cycle is not based on the calendar year, but initially on the time of admission and then on the time of the last inspection. Please note that the inspection period is also not based on the calendar year, but comprises the entire period since the last inspection respectively. Due to the core responsibility of SRO PolyReg to regulate, the inspection cycle has priority over the fee cycle with regard to answering different questions – especially with regard to inactivity (see question I.2).

    Regarding the above explanations of fee and training year and taking into consideration question G.3, the cycle of inactivity is based on the calendar year.

H. SRO PolyReg: Maintaining and ending the membership

  1. I have just been accepted as a member of SRO PolyReg. What do I have to do now?

    With immediate effect you have to ensure compliance with all association duties. We advise you that you have the responsibility to carry out the duties, while it is SRO PolyReg's responsibility to supervise you in doing this, to advise you of any breaches of duties and – if necessary – to enforce the fulfillment of duties by means of sanctions.

    Equally, it is your responsibility to exercise rights you are entitled to based on the Statutes and Regulations and in doing this to adhere to any existing time limits and deadlines.

  2. Where can I review my responsibilities, in case I forget?

    In the Statutes and the Regulations of SRO PolyReg, additionally in the Code of Professional Conduct and the associated Control Regulations.

    SRO PolyReg has published all mentioned basic documents in several languages on its Homepage. Thus they are available at any time, and they are assumed to be known to all members, in particular since the members declare with the general membership declaration of page 18 of the admission application, that they have read the Statutes and Regulations and subject themselves to their provisions without reservation. The same applies accordingly to the Code of Professional Conduct and its implementation (see page 8 of the subordination declaration).

  3. What are my duties as a member of SRO PolyReg?

    In addition to the duties of care, that you have to fulfill as a financial intermediary under the MLA and that are defined in the Regulations of SRO PolyReg, and the fulfilment of the training obligation according to art. 8 MLA, you are subject to additional association duties. Their implementation is a requirement for maintaining the membership, as well as the lack of qualifications regarding the duties of care of the MLA.

    The training obligation is initially fulfilled by attending the basic training within half a year after becoming a member or after the time of appointment for new employees (article 39 paragraph 2 of the Statutes in conjunction with article 60 paragraph 3 of the Regulations). From the following year the obligation to carry out further training must be fulfilled. SRO PolyReg considers this obligation fulfilled when a representative of the member has attended a further training course; one person can fulfill this obligation for several members at the same time.

    As an exception, the obligation of further training can be fulfilled by attending training courses of another SRO. This however requires the prior approval of the executive director of SRO PolyReg (article 60 paragraph 1 of the Regulations). SRO PolyReg acknowledges training courses of other SROs as equivalent to its own training. However, it does not acknowledge MLA courses of banks, insurance companies and other institutions.

    In addition, there is the internal duty to report changes. According to article 8 paragraph 2 of the Statutes, members must immediately and on their own accord notify the executive director of any changes to the requirements that have allowed their acceptance as members. This keeps the members' files up to date. For the ease of members, SRO PolyReg has created a form to report changes, which should be used for all reports of changes and simultaneously explains which enclosures are required (if any). The form can be downloaded from SRO PolyReg's Homepage.

    In addition to the duty to pay fees and the general duty to pay any amounts due to the association, there is a general duty of co-operation, especially for the (ordinary and extraordinary) inspections (article 50 paragraph 6 and article 52 paragraph 3 of the Regulations), but also regarding the continuous availability and the implementation of instructions of SRO PolyReg and for sanction proceedings (article 53 paragraph 2 of the Regulations).

    Regulated asset managers must also comply with the duties according to the Code of Professional Conduct and Control Regulations, which in turn are mostly identical to the ones mentioned above, if they are association duties and not specific professional duties.

  4. What are my rights as a member of SRO PolyReg?

    Attendance of and participation in the general meeting (article 27 of the Statutes), suggestion of agenda items for the general meeting (article 25 paragraph 4 of the Statutes), application to use own auditors as MLA inspection agency (article 34 paragraph 1 of the Statutes), application for in-house training (article 39 paragraph 4 of the Statutes), application for approval to attend training at another SRO (article 60 paragraph 1 of the Regulations), submission of an inactivity declaration and payment of a reduced flat rate fee in the following year (member's fees item 5), regulatory rights in implementing the duties of care of the MLA, in particular the appointment of third parties (pursuant to article 37 of the Regulations) and application for a deferred audit in at most two consecutive years (pursuant to article 50 paragraph 3 and article 4 of the Statutes).

    For regulated asset managers additional rights may arise from the Code of Professional Conduct and Control Regulations.

  5. How does membership of SRO PolyReg end?

    Either by withdrawal or by exclusion. An implied end through bankruptcy for example is not envisaged. It is the members' responsibility to fulfill the association duties until the end of their activities as financial intermediaries, authorised by means of their membership (see question H.3 regarding the duties to report changes and of co-operation). Even in the case of bankruptcy, membership must be terminated properly.

    The only exceptions here are deaths of sole traders. Should however sole shareholders or individual partners of legal entities die, the heirs must notify SRO PolyReg whether the membership will continue (normally this requires new appointments of functionaries and therefore a report of changes) or whether the company is being dissolved, which in turn requires notification of withdrawal.

    A withdrawal is effected at any time by simple written notification of the executive director of SRO PolyReg (pursuant to article 9 of the Statutes).

    The exclusion is normally a (the harshest) sanction against a member and is only decided on when sanction proceedings have been held, which gave the respective member the right to be heard - unless the member does not pay his/her receivables in spite of repeated reminders and a final phone enquiry or unless the member is just no longer available. In such cases exclusion will be direct and without sanction proceedings (see question K.4).

I. SRO PolyReg: Inspections

  1. How often will I be inspected? And what role does inactivity play in this?

    On average, members will be inspected once every 12 months by an inspection agency on their own premises with regard to compliance with the regulations of the association and their duties of care and reporting (article 50 paragraph 1 of the Regulations; see questions H.2 and H.3).

    This rule applies to all members, in particular also to inactive members (see question G.3).

    This rule only becomes invalid if a deferred inspection pursuant to article 50 paragraph 3 of the regulations has been approved (see question I.2).

  2. What is a deferred inspection? How can I obtain this?

    At the written request of a member, the ordinary inspection can be deferred once or twice by a year, if the last inspection was carried out by a PolyReg inspection agency and it was not a first inspection, if the two previous inspections did not reveal any material shortcomings and if the activity of the member only carries a small risk of money-laundering, given the scale of the member's business (volume of transactions, assets under management, number of customers, etc), the origin of the customers and the stability of the business relationships (article 50 paragraph 3 of the Regulations). Ideally therefore, members can be inspected at three-year intervals, if they submit each application for a deferred inspection on time.

    For inactive members a previous qualification-free inspection will suffice for the evaluation of the application.

    First inspections can accordingly never be deferred. Therefore, new members are always inspected once initially, before an application for a deferred inspection will be considered. The first inspection completes the first year of membership, so to speak. Since the inspection cycle and fee year are mostly not identical, this can result in a declared inactivity only being taken into consideration in terms of member's fees for the third calendar year of a membership. It also affects the training obligation (see question G.3).

    Inspections are never deferred automatically – not even for inactive members. In fact, it is the members' responsibility to apply for a deferred inspection. For this SRO PolyReg is making available a standard form. The following deadlines must be noted: For the first deferred inspection, the application must be submitted to the administrative office of SRO PolyReg within 6 months after the last inspection. The application for the second deferral can be made after 6 months from the last inspection at the earliest, but must be made within a year, that is the latest 18 months after the last inspection.

  3. What is the ordinary inspection procedure?

    The member's inspection agency will be commissioned by SRO PolyReg to carry out the MLA inspection in time and with the setting of a time limit. Then SRO PolyReg contacts the member and agrees an inspection date. When the inspection has been carried out, the inspection agency prepares a written report for SRO PolyReg and sends a copy of the report for the member either to SRO PolyReg or directly to the member. Then the inspection service is invoiced to the member based on the hourly rate to be agreed by the member and must be paid by the member (see question D.7).

    Qualifications stated in the inspection report result in instructions from SRO PolyReg to remedy the qualified issues and can – dependent on the gravity of the identified breach – result in the institution of sanction proceedings (article 51 paragraph 4 of the Statutes; see question K.1).

    Inspectors and SRO PolyReg maintain the trade or professional confidentiality of the members (article 50 paragraph 7 of the Regulations).

    Inspections can also be carried out without prior notice – if the purpose of the inspections demands it.

  4. What is the purpose of the inspection?

    The inspection agencies check compliance with the provisions of the Money Laundering Act, the Statutes and the Regulations.

    The inspection proceeds in accordance with the terms of the audit plan and, in particular, covers whether the documents required to implement the duties of identification and documentation have been properly drawn up and preserved, whether the said documents permit the conclusion that the duties of identification and clarification have been complied with, whether the duty to report has been properly complied with and whether the duty to provide training has been complied with and the staff have adequate knowledge, or whether an in-house training plan has been fully implemented.

    The inspection also covers whether the conditions for continued membership of PolyReg are satisfied and whether all changes have been reported immediately in accordance with article 8 paragraph 2 of the Statutes (article 51 paragraph 1-3 of the Regulations).

  5. What is an extraordinary inspection?

    The purpose of an extraordinary inspection is to clarify unspecified grounds for suspicion or irregularities and to find further information in case of any identified breaches, if the findings of an ordinary inspection prove insufficient (article 52 paragraph 1 of the Regulations).

  6. Who carries out an extraordinary inspection? What is the procedure?

    An extraordinary inspection is carried out – if not by the executive director himself – by an investigator, who is independent of SRO PolyReg acting on behalf of the executive board and who will draw up a written report for the executive board. The financial intermediary bears the costs of the extraordinary inspection of the independent investigator (article 49 of the Regulations).

    The independent investigator gathers evidence for the files and draws up a written report of his findings. His report may also call for the application of sanctions. The member concerned must assist the independent investigator and permit him to carry out all necessary inspections (article 52 paragraph 2 and 3 of the Regulations).

    Based on the knowledge gained this way, the executive board decides on the institution of any sanction proceedings.

    Inspections can also be carried out without prior notice – if the purpose of the inspections demands it.

  7. What are the costs of such inspections?

    Ordinary inspections are charged according to the time spent at a rate of CHF 240. 00/hour plus expenses and cash expenditure (70 centimes/km; 80 centimes/copy), if they are carried out by a PolyReg inspection agency. The same applies to the rates of independent investigators. The calculation unit is 15 minutes.

    Otherwise the invoiced hourly rates are subject to the guidelines of the inspection agency (specially requested by the member) (see questions D.7 and E.9). PolyReg charges members inspected by their own special inspection agency a fee of 10% of the total audit costs to cover the expenses associated with monitoring and overseeing this process (article 42 paragraph 4 of the Statutes).

J. PolyAsset: Questions regarding regulation by the Code of Professional Conduct / inspections

  1. How frequently will I/my company be inspected? What role does inactivity within the framework of SRO PolyReg play here?

    The regulated asset managers are inspected (in addition to the MLA inspection) once a year for compliance with the Code of Professional Conduct. Asset managers, who have subjected themselves to the Code of Professional Conduct within the first half year of a calendar year, must submit an annual inspection report the latest until 31 December each year. All other members must submit an annual inspection report the latest until 31 June each year (article 10 paragraph 1 RKSS).

    Inactivity declared within the framework of membership of SRO PolyReg is irrelevant here, particularly since it equally does not constitute an exception from the MLA inspection.

  2. Is there a deferral for the Code of Professional Conduct inspection as there is for SRO PolyReg?

    No. Inspections regarding MLA and Code of Professional Conduct are independent of each other.

    The executive director can for good reasons grant extensions of two months at the most for the submission of the inspection report. This however does not defer the deadline for future inspections (article 10 paragraph 4 RKSS).

  3. What is the ordinary inspection procedure?

    The asset manager commissions his inspection agency on his own accord and in such due time that the inspection report can be submitted to the association until the deadline (see question J.1) (the date of the postmark shall apply; article 10 paragraph 2 RKSS).

    The inspection is carried out on the premises of the asset manager and follows the proven and recognised principles of auditing (article 11 paragraph 1 RKSS).

    The inspected asset manager must provide the inspection agency with all records and documents required for the inspection of compliance with the professional duties. The inspection agency is also entitled to inspect the accounting, customer files and the documents of company or customer accounts of the asset manager. Furthermore, all relevant information must be disclosed to the inspection agency (article 11 paragraph 2 RKSS).

    The inspection agency maintains the trade or professional confidentiality of the asset manager (article 11 paragraph 3 RKSS).

  4. What is the purpose of the inspection?

    The inspection agencies check the compliance with the provisions of the Code of Professional Conduct. Goal of the inspection is the determination whether the asset manager will probably comply with the Code of Professional Conduct. Identified breaches must be recorded in the inspection report. The inspection is carried out in spot checks that have been defined by the inspection agency in such a way that systematic breaches can be identified with great probability. The specific inspection content is based on the provisions of article 12 paragraph 2 RKSS.

    The inspection also covers whether the asset manager appears to ensure irreproachable business activities, to have an organisation suitable to his activities and whether his activities are consistent with the applicable financial market laws and whether he adheres to the defined investment strategies, manages investments and transactions in the customers' interest and provides the appropriate risk distribution within his investment strategy. Here it must be checked especially whether organisational measures required for this are taken and implemented.

    The inspection agencies forward a signed copy of their reports to the association's executive director within 14 days after the end of the inspection, but the latest until the deadline (see question J.1).

  5. What is an extraordinary inspection?

    Extraordinary inspections are designed to corroborate information on breaches of the Code of Professional Conduct by an asset manager or to help prepare sanction proceedings (article 14 paragraph 1 RKSS).

  6. Who carries out an extraordinary inspection? What is the procedure?

    Extraordinary inspections are carried out by the executive director himself or an independent investigator appointed by him (article 14 paragraph 1 RKSS).

    The independent investigator gathers evidence for the files and draws up a written report of his findings. His report may also call for the application of sanctions. The member concerned must assist the independent investigator and permit him to carry out all necessary inspections (article 14 paragraph 2 and 3 RKSS).

    Based on the knowledge gained this way, the executive board decides on the institution of any sanction proceedings.

  7. What are the consequences of qualifications identified during such inspections?

    Qualifications identified by the inspection agency or reports by third parties are clarified and further investigated so that decisions can be made to institute sanction proceedings or not to follow up (see question J.6).

    Qualifications must be reported to the money laundering supervisory agency responsible for the asset manager, unless this is identical with the association (article 13 paragraph 2 RKSS).

    If in (later) proceedings regarding the compliance with the Code of Professional Conduct the guarantee of proper business activity of the asset manager is called into question, the issue of guarantee according to art. 14 MLA or article 2 paragraph 2 and article 4 paragraph 2 of the Statutes of SRO PolyReg must also be investigated. If necessary, additional sanction proceedings must be held in such a case, pursuant to the provisions of the MLA regulations (article 16 RKSS).

  8. What are the costs of such inspections?

    The costs are based on the agreements that the subordinated asset manager enters into with the inspection agency chosen by him.

K. SRO PolyReg: Sanctions and arbitral tribunal

  1. When does SRO PolyReg resort to the instrument of sanctions?

    Sanctions are applied for established breaches of the obligations laid down by the association or of the obligations under the MLA or the Regulations, namely the duties of care (art. 3-8 MLA), the duty to report (art. 9 MLA), training obligation (art. 8 MLA) (article 45 paragraph 1 of the Statutes).

    In the case of negligent minor breaches, fines can be replaced with warnings or sanctions can be dispensed with (article 54 paragraph 2 of the Regulations). In case of minor breaches that can also be remedied in the short term (max. 30 days), as a rule no sanction proceedings will be instituted. Members held to be in breach of the regulations are however notified in writing and with a set time limit to remedy the breach.

  2. What sanctions are possible?

    The following sanctions can be imposed: Warning, fine (legally: penalty) of CHF 300.00 to CHF 300,000. 00, threat of exclusion and exclusion (article 45 paragraph 2 of the Statutes and article 53 paragraph 1 of the Regulations).

    All cases of wilful breaches are further punishable by fines. The investigation costs and the expenses for rulings and copying may also be charged together with the sanctions (article 45 paragraph 3 and 4 of the Statutes).

    Where necessary, the sanction may be combined with a demand to restore the proper legal situation within a maximum period of three months. The demand may be combined with instructions and conditions for the internal organisation of the financial intermediary (article 53 paragraph 2 of the Regulations).

  3. How are fines calculated?

    Any financial penalties applied must be in proportion to the seriousness of the breach, the degree of culpability and the economic capacity of the financial intermediary. The fact that the state applies measures and/or penalties at the same time does not prevent the association from imposing its own sanctions. However, such penalties should be moderated if the combination of penalties would be unreasonably harsh (article 54 paragraph 1 of the Regulations).

  4. What causes the exclusion from SRO PolyReg?

    Exclusion may be ordered in the event of repeated breaches of the Regulations or the Statutes, if despite warning, the financial intermediary concerned fails to restore the regulatory or statutory situation within the time limit set (article 55 paragraph 1 of the Regulations).

    A member will be excluded if he no longer satisfies the conditions required to retain membership (see question H.3), particularly – but not exclusively – if he does not properly fulfil his duties under the MLA, or if he can no longer guarantee irreproachable business activity in terms of personnel and organisation and fails to restore the proper situation within a fixed time limit of at most three months (article 55 paragraph 2 of the Regulations). Exclusion will also be ordered immediately in case of non-payment of receivables due to the association (see question H.5).

    In article 2 paragraph 2 of the Statutes SRO PolyReg also requires its members to provide high quality financial services which are legally and ethically irreproachable. The legal irreproachability is judged on the basis of the (foreseeable) compliance with all laws and orders (in particular those relevant to the financial market). Breaches of such provisions can in certain circumstances result in exclusion.

    Members must be excluded if they have breached the provisions of the MLA, in particular the duty to report, be it wilfully or grossly negligently (article 55 paragraph 3 of the Regulations).

    In any event, the exclusion or threat of exclusion may also be accompanied by a financial penalty (article 55 paragraph 4 of the Statutes; see question K.3).

  5. What is the procedure?

    The proceedings begin with the written notification (delivered by registered mail) of the member of the institution of the proceedings. This notification contains the remonstrances and the possible sanction. Additionally, the communication sets a time limit for the member to respond to all points (remonstrances, possible sanction and its extent) in writing.

    On receipt of the response or after the lapse of the time to respond without receiving any response, the executive committee decides on imposing a sanction. It takes into consideration any arguments produced by the member, which it however evaluates at its own discretion (see question K.7).

    Once a decision has been made, it and its reasons are sent to the member in writing and by registered mail. All decisions of sanctions can then be taken on for appeal to the PolyReg arbitral tribunal (article 37 of the Statutes and article 58 of the Regulations). The arbitral tribunal resolves any disputes between members and SRO PolyReg finally (see question E.13).

    In practice however, the arbitral tribunal only handles limited appeals of exclusions, which are imposed due to non-payment of receivables due to the association, especially since the arbitral tribunal is not designed to provide members, who have not paid their dues in spite of receiving three reminders with the threat of exclusion, with another delay of payment by means of legal dispute.

  6. What consequences do sanction proceedings have with regard to the Swiss Financial Market Supervisory Authority FINMA?

    If disciplinary or exclusion proceedings, which may result in financial penalties or exclusion from PolyReg, are instituted against an affiliated financial intermediary, the decisions concerning the institution and conclusion of the proceedings are disclosed to the Swiss Financial Market Supervisory Authority FINMA (article 57 paragraph 1 of the Regulations).

    If proceedings are instituted against a person subject to professional secrecy, the executive delegation must take the necessary steps to ensure that professional secrecy is maintained (for example by anonymising documents) (article 57 paragraph 2 of the Regulations).

  7. Which legal form do the sanction proceedings of SRO PolyReg have and which procedural principles are applied?

    The object of SRO PolyReg comprises the enforcement of compliance with the duties of care of the MLA and additionally the inspection of whether its members provide high quality financial services which are legally and ethically irreproachable (see article 2 paragraph 2 of the Statutes). This task is carried out in accordance with the constant practice of many years of the Control Authority (FINMA), whereby even the breach of other provisions relevant to the financial market laws calls into question the reputation of the financial intermediary and thus also the guarantee of compliance with the duties of care.

    SRO PolyReg does not exercise prudential supervision of its members and does not introduce such supervision via the backdoor, when it pursues breaches of article 2 paragraph 2 of the Statutes. The sanction proceedings of SRO PolyReg and measures based on them have a preventative nature and the primary goal to restore the due state. Sanction proceedings of SRO PolyReg however do not have punitive character.

    The principle of "in dubio pro reo" represents a rule in evaluating evidence for criminal court judges. However, decisive for the institution of sanction proceedings is the question whether there is sufficient initial suspicion. Then the case must be investigated officially by the executive board or the executive committee in analogy with the provisions of administrative law (see art. 12 and 13 VwVG), and the decision to be made is based on the due conviction of the judging body. Therefore, the principle of "in dubio pro reo" does not apply (which does not apply for administrative proceedings any way, which e contrario ensues from art. 6 paragraph 2 EMRK), but rather the principle of free consideration of evidence applies (in analogy with art. 19 VwVG in conjunction with art. 40 of the Federal Act of 4 December 1947 regarding the federal civil procedure BZP; SR 273).

    Therefore, SRO PolyReg is not bound by certain rigid rules of evidence, which stipulate how it must arrive at its decisions, how a valid proof is established and what evidentiary value the individual pieces of evidence have in relation to each other (see BGE 130 II 482 E. 3.2; BVGE of 3 August 2007, C-1170/2006, E. 6.1).

    In addition, sanction proceedings of SRO PolyReg take due account of the presumption of innocence and the principle of art. 8 ZGB, since they maintain the guarantee of the right to be heard for the concerned parties and the decision of imposing sanctions or not is only made after the consideration of all evidence and produced arguments; furthermore, such decisions must – if necessary – be able to stand up to revision by the statutory arbitral tribunal.

    For these reasons, the institution of sanction proceedings does not constitute a prejudgement and does not violate the presumption of innocence. Its purpose is to demonstrate to the members in detail the accusations brought against them and to notify them of the possible sanction so that the members can avail themselves of their right to be heard.

    After all, the principle of free consideration of evidence demands that the judging body forms its opinion with due diligence, conscientiously and without prejudice as to whether the facts to be proven are considered true or not. Proof is established if the consideration of evidence leads to the conclusion that the legally relevant fact is real (BGE 114 II 289 E. 2a; BGE 105 Ib 114 E. 1a).

    With regard to the evaluation of internal matters of a member, SRO PolyReg has the right to draw conclusions regarding unknown facts (result of presumption), based on known facts (base of presumption). Such factual presumptions can be made in all areas of the application of law, particularly in public law. They are probable conclusions, drawn by means of life experience (BGE 130 II 482 E. 3.2 with references; BVGE of 3 August 2007, C-1170/2006, E. 6.1).

  8. What do sanction proceedings cost?

    In addition to sanctions, investigation costs and the expenses for rulings can be imposed (article 45 paragraph 4 of the Statutes). The calculation of the expenses for rulings is based on the provisions of the Court Fees Ordinance of the Cantonal High Court in Zurich of 4 April 2007.

  9. Which remedies exist against sanction decisions of SRO PolyReg?

    The appeal to the arbitral tribunal (see question K.5). This tribunal resolves disputes between members and SRO PolyReg finally. Other remedies do not exist (see question E.13).

  10. What is the function of the arbitration officer?

    The arbitration officer is responsible for directing the course of the proceedings up to the point at which the written grounds of appeal and the response to the appeal have been presented and the arbitral tribunal has been constituted. The subsequent conduct of the proceedings is determined by the tribunal (article 38 paragraph 1 of the Statutes). The then chosen arbitrators are independent of the association (non-members) and must have professional expertise.

    In particular, the arbitration officer must set the relevant time limits and warn the parties of the consequences of failing to meet them, as well as collect the registration fee. The arbitration officer may dismiss or adjourn appeal proceedings for procedural reasons where the relevant grounds arise prior to the constitution of the arbitral tribunal (for example, failure to present the grounds of appeal within the time limit, failure to pay the registration fee, withdrawal of the appeal, decision not to proceed with the appeal, review and simultaneous lifting of the disputed decision by the executive board, bankruptcy of an appellant member etc). In such cases, it is possible to waive the fees for the appeal proceedings and the award of costs (article 38 paragraph 2 of the Statutes; see question K.13).

  11. What is the procedure of the arbitral tribunal?

    The procedure of the arbitral tribunal is explained in detail in article 38 of the Statutes.

  12. What about the suspensive effect of appeals? What are the consequences of lifting the suspensive effect?

    In general, appeals to the arbitral tribunal have suspensive effect. This means that the sanction decision will only come into effect when the arbitral tribunal has made its final judgement.

    In urgent cases, the executive board may lift the suspensive effect of the appeal and take precautionary measures. In the event of objection, such action by the executive board is subject to review by a single arbitrator, drawn by lot for this specific purpose (article 12 paragraph 4 of the Statutes).

    The lifting of the suspensive effect of an appeal to the arbitral tribunal against an exclusion decision means that an excluded member either has to cease its activities as a financial intermediary or to join another SRO within two months or to apply for subordination to the FINMA.

    In general, the suspensive effect is lifted pursuant to article 12 paragraph 2 of the Statutes, if regulated supervision of the member to be excluded cannot or no longer be considered guaranteed.

    This must be suspected in any possible situation, in particular if the activity of the member runs contrary to the requirements and provisions of the law, Statutes and Regulations and, due to the basic nature of the identified grievance, there is no prospect to achieve a legal state within reasonable time – be it because the member would be forced to cease its business activity, be it because the member is evading the supervision of SRO PolyReg, for example by not allowing itself to be inspected, be it because the member actively resists instructions of SRO PolyReg or be it because an activity, which has already been identified as illegal elsewhere, is being continued in this country.

    In contrast, any appeal against the amount of set costs and fees always has suspensive effect.

  13. What are the costs of arbitration proceedings?

    Initially, registration fees are charged as security. They are based on the matter in dispute and amount to

    CHF 500.00, where only a fee is at issue;
    CHF 1,000.00, where a sanction is at issue;
    CHF 2,000.00, where refusal of membership or expulsion from the Association is at issue.

    Other costs of proceedings are charged on a time basis, in particular the hours required by the arbitrators involved.