Cross-border is a term that has long been part of the reality for those operating in the financial sector. It is often mentioned by the compliance officer, and banks seem to have learned, perhaps at their own expense, that with European clientele and covered by MiFID rules, there is no room for jokes, Francesco Magistra writes in his contribution for finews.first.

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This is especially true since the Swiss authorities have taken over the control of compliance on behalf of foreign authorities. The existence of «country manuals,» legal studies on the rules to follow in each country, has become a requirement for the annual review, but how many independent external managers have already read them carefully? The perception is that the infringement of these rules continues to be considered a trivial matter, and therefore, the corporate procedures have not been adopted by many independent external managers.

For these, Finma registration has resulted in a significant increase in workload, bureaucracy, and costs but has not provided any tangible benefits that anyone might have expected. Moreover, more flexible access to European clientele has never been a focal point.

The collaboration agreement signed on 16 August 2023 between Finma, Consob, and the Bank of Italy should be a cause for concern for all players in the Swiss financial market. The agreement is designed to increase control by Finma over those operating in the Italian market and, at the same time, compel banks and managers with significant Italian clientele to seek a license from Consob.

«This type of agreement may be extended to other EU countries»

According to experts, this costly solution would be justified for institutions managing assets of at least $800 million. This agreement foresees increased cooperation and further exchange of information between the two supervisory authorities, aimed at ensuring adequate control and supervision of cross-border financial activities towards theoretically easier access to the Italian market for big players. Drawing inspiration from recent Swiss authorities’ policies, one can only assume that this type of agreement may serve as a model and be extended to other EU countries.

This new type of agreement will make life even more challenging for small or medium-sized independent wealth managers. Access to the Italian and European markets will be limited to stronger institutions, and the game will no longer be played with the same cards. Some will soon realize, at their own expense, that the violation of cross-border rules will be deemed a serious offense that could jeopardize the very license of the company that breaches them.

«The solution has existed for quite some time»

For a European with significant savings, Switzerland remains the most attractive financial center for many reasons. Even if the demand for the Swiss solution does not wane, though, one must wonder if the game is still worth the candle: are we destined to witness a slow but steady erosion of managed assets?

The solution has existed for quite some time and is just an hour away from Zurich and two from Lugano: The Principality of Liechtenstein has been part of the European Economic Area since 1991, and its financial center has successfully embraced MiFID regulation. With these prerogatives and, consequently, the European passport in hand, access to any financial center in the EU is facilitated.

In Italy, to stay with the example, our company Osiris Asset Management has been authorized as an «Investment Firm authorized in other EU states without a branch in Italy». Our decision to establish a management company in Liechtenstein dates to 2006 and has proven to be a winning solution from the start, thanks to the capacity, agility, and diligence of local authorities and regulatory bodies.

Francesco Magistra is Chairman of the Board of Directors of the Ticino-based Nemesis Group in Lugano and a partner at the firm Osiris Asset Management in Vaduz in the Principality of Liechtenstein. After completing his education in New York, he was appointed representative of Swiss Bank Corporation (SBC, later UBS) in Lima and then in Montevideo. After returning to Switzerland, he resumed the «Fixed Income Emerging Markets» sales development project before returning to Lugano as Head of Latin America, responsible for Brazil, Argentina, Venezuela, and Peru. In total, he worked for UBS for 15 years. He has been self-employed since 2001.

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