Background
FINMA Circular 2025/2 “Rules of Conduct under FinSA/FinSO” entered into force on 1 January 2025. For the first time, it comprehensively specifies supervisory expectations regarding information duties, conflict-of-interest rules, and suitability processes.
Based on this, the FinSA audit programmes of the supervisory organisations will be expanded from 2026 onwards. The audit of asset managers under Art. 17 FinIA will become more risk-oriented and substantive. The focus will no longer be limited to whether policies and processes formally exist, but also whether they are effectively implemented in practice, properly documented, and supported by a functioning internal control system.
New Audit Focus Areas from 2026
| Audit Topic | Core Content |
|---|---|
| Client Segmentation | Review of segmentation processes, including execution-only clients. |
| Knowledge and Experience | Review of the collection and documentation of clients’ knowledge and experience. |
| Information Duties / Risk Disclosure | Review of risk disclosures, cost information, concentration risks, economic ties, and market offering. |
| Appropriateness and Suitability | Review of consistency between risk profile, strategy, and financial instruments used. |
| Documentation and Accountability | Review of the documentation of recommendations, client information, and accountability processes. |
| Transparency in Client Orders | Review of best execution, delegation to third parties, and periodic review processes. |
| Organisational Measures | Review of suitability risks, escalation processes, governance, and the ICS. |
| Conflicts of Interest | Review of the financial instrument selection process, particularly regarding proprietary products, retrocessions, and economic ties. |
Proprietary Financial Instruments and Conflicts of Interest
One focus area concerns the use of proprietary or affiliated financial instruments. No conclusive legal definition currently exists. Proprietary financial instruments may include self-managed funds, AMCs, white-label products, or products in which the institution has an economic or structural involvement.
Asset managers must disclose whether and to what extent proprietary products are used, which economic ties exist, and which market offering was considered during the selection process. General disclosures in client documentation are insufficient. Disclosures must be concrete, transparent, and client-specific.
Sanctions Screening and Response Capability
In the area of sanctions and embargo screening, supervisory organisations and audit firms increasingly expect supervised institutions to be able to review new and existing business relationships for sanctions exposure in a timely manner.
Particular focus is placed on:
- the frequency and timeliness of screening processes;
- response capability regarding new sanctions lists;
- documentation of matches and escalations;
- organisational integration of sanctions compliance processes;
- the technical and operational design of screening processes.
Institutions with more complex structures, international business relationships, or custodian banks outside Switzerland may face increased expectations regarding response capability. Purely manual processes are increasingly viewed critically.
Practical Implications
The new audit focus areas require asset managers and managers of collective assets to review and document their FinSA processes substantively. This particularly concerns the collection of risk profiles, client knowledge and experience, appropriateness and suitability assessments, as well as the disclosure of concentration risks, economic ties, retrocessions, and conflicts of interest.
The financial instrument selection process must be documented in a transparent and traceable manner, particularly when proprietary or affiliated products are used. In addition, the internal control system must effectively monitor compliance with FinSA processes. Sample reviews in client files and portfolios should be prepared and documented.
Additional Relevance for Managers of Collective Assets under Art. 24 FinIA
For managers of collective assets under Art. 24 FinIA, particular focus is additionally placed on the use of proprietary collective investment schemes, structured products, or affiliated financial instruments within mandates.
The review focuses in particular on:
- transparent disclosure of economic ties;
- governance relating to the use of proprietary or affiliated products;
- traceability of the financial instrument selection process;
- organisational handling of conflicts of interest;
- system-based identification of proprietary products within the managed assets.
