Professional clients under MIFID or LSFin: the detail that changes everything

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Professional clients under MIFID or LSFin: the detail that changes everything

Ambitions common to LSFin and MIFID II

Generally speaking, the LSFin has the same ambitions as MIFID II. A kind of little sister to the European law, which puts us on the same footing as our neighbors. That said, Swiss managers remain better off than their European counterparts.

As we know, under both LSFin and MIFID II, requirements for professional customers have been considerably eased. Just compare them with those that apply to private customers: no appropriateness, reduced or even eliminated duty to inform and account, etc…

But what exactly is an opting-out business customer?

Under Swiss law, this is a private client requesting to be treated as a professional client (opting out), with assets of CHF 2 million. If the customer concerned has experience or training in the financial sector, the threshold rises to CHF 500,000. Under MIFID II, in contrast to LSFin, knowledge and experience are essential, whether assets are EUR 500,000, EUR 2 million or even EUR 20 million. These elements must be calculated according to precise criteria. To claim to have the requisite knowledge and experience, a customer must have worked for at least one year in the finance field in a position requiring knowledge of financial and transactional services. Or he must have carried out 10 transactions per quarter over the last 4 quarters.

The difference between LSFin and MIFID changes everything

A detail? Not really: it’s a safe bet that a significant proportion of private clients managed in Switzerland have assets in excess of CHF 2 million. That’s what being a private banking client is all about. But how many of them are trading several times a month or working in finance?

This question is particularly relevant to European clients managed in Switzerland. Indeed, the LSFin and MIFID II could apply jointly to the latter, under the Lugano Convention for example.