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Swiss FOREX companies
need bank license
In its 2006 annual report, the Swiss Federal Banking Commission
had announced its intention to take measures regarding
the forex traders. The Swiss Federal Banking Commission started a consultation
procedure of its project to modify the Ordinance of May 17, 1972 on Banks
and Savings Banks. Due to an increase of abuses in the field of forex market and
registered a growing number of complaints, often originating from small
investors having suffered important losses and reproaching currency brokers
to lack transparency as well as information on the risks linked to transactions
on currency market.
In order to reinforce the protection of investors, the Swiss Federal Banking Commission plans to
subject the activities of the forex traders to a banking
license. The Swiss Legislation regarding banking and finance does not define the
notion of forex traders. If the banks are the principal
actors in the currency market, other participants can also take part, such as
mutual funds specialised in forex operations, asset managers, and more
recently, currency brokers acting on behalf of their clients, who
accept funds from their clients and who, in order to execute the orders, own
accounts on their behalf. It is the last category mentioned which is
mostly concerned by the project of modification of the banking law.
Even though the activities of the currency brokers are similar to those of the
securities dealers, the former are not subject to the Federal Law on Stock
Exchanges and Securities Dealers of March 24, 1995, as long as they do not deal with standardized
derivatives on behalf of their clients.
The Swiss Federal Banking Commission notices that from a financial point of view the activities held
by forex traders on behalf of their clients, although containing many similarities with
the deposit and credit activities reserved to banks, are nevertheless not ruled the same way.
The exemption from supervision is no longer justified, deposits made towards
forex traders should be regarded as banking operations. Because of that the
forex traders working on behalf of their clients are required to
obtain from the supervisory authority a license to exercise an activity as a bank.
The modification proposed by the banking act will take effect on April 1st,
2008. The forex traders will have a period of 3 months to inform the Swiss Federal Banking Commission and
will have a period of one year starting from the date of effect of the
modified banking law to satisfy the
requirements of the banking law and deposit an authorization request at the
The Swiss Federal Banking Commission.
If you have more questions about alternative solutions to Swiss Forex trading company please contact us.
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