A securities firm is what most people mean when they say “broker” in Switzerland. It is the licence granted to a company that trades securities in its own name for the account of clients, and it requires fully paid-up capital of at least CHF 1.5 million, maintained permanently. Setting up a securities firm in Switzerland is therefore not the same project as setting up a portfolio manager, even though both are licensed under the same act: the dividing line is the name in which you act, and it decides the capital, the procedure and the supervision that follow.
Contents
- What a securities firm is, in three alternative cases
- Securities firm or portfolio manager: the dividing line
- Capital: CHF 1.5 million, paid up and maintained
- The file to assemble before applying
- What the licence brings with it
- Edge cases: market making, organised trading, crypto platforms
- Company, seat and substance
- Common mistakes
- FAQ
What a securities firm is, in three alternative cases
The Financial Institutions Act defines a securities firm as anyone who, on a professional basis, falls into one of three situations. My Swiss Company SA starts every securities firm project with this test, before any timetable is drawn up.
| Case | What it covers |
|---|---|
| a | Trades in securities in its own name, for the account of clients |
| b | Trades in securities short-term for its own account, is principally active on the financial market, and either could endanger the proper functioning of that market, or operates as a member of a trading venue, or runs an organised trading facility |
| c | Trades in securities short-term for its own account and quotes prices to the public for certain securities, permanently or on request (market maker) |
Source: Financial Institutions Act (SR 954.1), art. 41, consolidated version in force.
The three cases are alternatives. Case a is the classic broker. Cases b and c reach proprietary traders, but only under conditions: trading short-term on own account is not in itself enough, it has to be combined with systemic relevance, membership of a trading venue, operation of an organised trading facility, or market making.
That structure matters when you are designing the business. A proprietary trading firm that carefully avoids membership of a venue, does not quote prices to the public and is not principally active on the financial market sits outside the definition. Change any one of those three and it moves inside.
Securities firm or portfolio manager: the dividing line
This is the question founders ask first and the one answered least clearly elsewhere, including by the regulator, which describes each status separately without comparing them. The two definitions sit in the same act and the difference is one phrase.
A portfolio manager is anyone who can, on the basis of a mandate, dispose on a professional basis of client assets in the name and for the account of those clients.
A securities firm trades securities in its own name, for the account of clients.
Everything else follows from that. Acting in the client’s name means the client remains the contracting party and the manager exercises a mandate; acting in your own name means your company is the counterparty, carries the settlement, and appears as such to the market. It is why the capital requirements differ, why the supervision differs, and why the two licences are not interchangeable.
My Swiss Company’s view
Write out the contractual chain before choosing the status: who signs with the counterparty, whose name appears on the order, who bears settlement. Projects that describe themselves as brokerage often turn out to be portfolio management with an execution arrangement, and the reverse happens too. Getting this wrong costs an application.
Capital: CHF 1.5 million, paid up and maintained
The act requires securities firms to hold the minimum capital, fully paid up, and leaves the amount to the Federal Council. The implementing ordinance sets it: the minimum capital of securities firms must amount to at least CHF 1.5 million, be fully paid up, and be maintained permanently.
Three consequences are worth spelling out, because each of them catches projects.
First, “maintained permanently” is not the same as “paid in at incorporation”. The requirement is continuous, so the capital cannot be consumed by early losses and then topped up before an audit.
Second, where the company is founded by contributions in kind, the value of the assets contributed and the amount of liabilities assumed must be verified by a licensed audit firm. The same applies where an existing company is converted into a securities firm, which is the route many established businesses take and the one where the audit requirement is most often discovered late.
Third, for securities firms organised as partnerships, capital comprises the capital accounts and the assets of partners with unlimited liability, the latter being counted towards the minimum only where a declaration establishes the conditions.
For comparison, in the same ordinance the minimum capital of fund management companies is CHF 1 million. The Federal Council may also allow securities firms organised as partnerships to provide appropriate collateral instead of the minimum capital.
Your Swiss securities firm
The licence is applied for by a company that must exist, and hold up, first
Incorporating the entity and paying up CHF 1.5 million, arranging the audit firm’s verification where the contribution is in kind or where an existing company is being converted, organising governance, accounts and the substance a supervised institution needs: My Swiss Company forms and administers your Swiss company from Geneva, Lucerne or Zug, working alongside the regulatory counsel who files with FINMA.
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The file to assemble before applying
FINMA publishes the licensing requirements, and the recurring elements are the capital, a business plan demonstrating compliance with capital adequacy and risk diversification rules, an organisation matched to the activity, adequate risk management and internal controls, and persons responsible for administration and management who enjoy a good reputation and guarantee proper business conduct.
What the published list does not convey is the sequencing, and that is where time is lost. The application is filed by a company that already exists, with capital already paid up and an organisation already designed. The auditors, the governing bodies and the operating model are not details to be settled after the decision. In practice the corporate work, the banking relationship and the regulatory file advance in parallel, and the weakest of the three sets the pace.
Note also that a branch licence is required of any foreign bank or securities firm employing staff in Switzerland who permanently carry out transactions or trade securities. Opening a Swiss desk of an existing foreign broker is a different application from incorporating a Swiss securities firm, with different consequences.
What the licence brings with it
A securities firm is a financial intermediary under the Anti-Money Laundering Act, directly by virtue of its status. Due diligence obligations, documentation and reporting duties therefore apply from the first client relationship, and they are supervised rather than self-declared.
Ongoing prudential supervision follows, with an audit firm reporting to FINMA, permanent compliance with the authorisation conditions including the capital, and notification duties when anything material changes. The FINMA list of authorised institutions distinguishes account-holding from non-account-holding securities firms, a distinction that reflects whether client assets are held and that carries its own consequences.
Edge cases: market making, organised trading, crypto platforms
Three situations sit at the boundary and deserve to be checked before the model is fixed.
Market making. Quoting prices to the public for certain securities, permanently or on request, while trading short-term on own account, is case c of the definition. A liquidity provision arrangement can amount to this without being called market making.
Organised trading facility. Case b refers to operating an organised trading facility within the meaning of the Financial Market Infrastructure Act. Businesses that match client orders internally sometimes discover they are operating one.
Crypto platforms. Where the tokens traded qualify as securities, a venue can fall under the securities firm definition or under the DLT trading facility regime, depending on how it is built. The grid of Swiss crypto regimes runs from self-regulatory affiliation to the DLT trading facility, and the two analyses have to be carried out together rather than one after the other.
Company, seat and substance
A securities firm is almost always a company limited by shares, and the capital requirement makes the choice straightforward. The comparison of legal forms of business in Switzerland and the detail of the public limited company cover the mechanics, and the general sequence is in our guide to incorporating a company in Switzerland.
Substance is not optional here. A supervised institution is expected to be run from Switzerland, with governing bodies that meet, decisions that are taken and documented locally, and people whose reputation and professional record can be assessed. The roles and duties of the board are set out in our guide to business management and duties of the board of directors in Switzerland, and the responsibilities of Swiss company directors apply with particular force in a regulated entity.
The banking relationship deserves early attention, since a supervised institution needs accounts that match its model: our guide to opening a bank account for your company in Switzerland covers the general path. On the tax side, corporate taxation in Switzerland varies by canton, and Geneva and Zurich concentrate the counterparties, auditors and specialised advisers that a securities firm ends up needing.
Common mistakes
- Assuming “broker” maps to one Swiss status. It maps to three alternative cases, and to a different licence if you act in the client’s name.
- Treating the capital as a founding formality. It must be maintained permanently, not merely paid in.
- Discovering the audit requirement late. Contributions in kind and conversions of existing companies both require verification by a licensed audit firm.
- Filing before the company holds together. The application is made by an entity that already exists, with its organisation designed.
- Confusing a Swiss licence with a branch licence. A foreign broker opening a Swiss desk follows a different route.
- Running the crypto analysis separately. Where tokens are securities, both regimes have to be assessed together.
FAQ: setting up a securities firm in Switzerland
What is a securities firm under Swiss law?
A company that, on a professional basis, trades securities in its own name for the account of clients, or trades short-term on its own account while being principally active on the financial market and either potentially endangering that market, operating as a member of a trading venue or running an organised trading facility, or acts as a market maker by quoting prices to the public. The three cases are alternatives.
What is the minimum capital of a securities firm?
At least CHF 1.5 million, fully paid up and maintained permanently. Where the company is founded by contributions in kind, or where an existing company is converted into a securities firm, the value of the assets contributed and the liabilities assumed must be verified by a licensed audit firm. For comparison, fund management companies require CHF 1 million.
What is the difference between a securities firm and a portfolio manager?
The name in which the business acts. A portfolio manager disposes of client assets in the name and for the account of clients, on the basis of a mandate. A securities firm trades securities in its own name for the account of clients, so it is the counterparty and carries the settlement. They are two distinct licences with different capital requirements and different supervision.
Does a securities firm have anti-money laundering obligations?
Yes. Securities firms are financial intermediaries under the Anti-Money Laundering Act by virtue of their status, so due diligence, documentation and reporting duties apply from the first client relationship and are subject to supervision rather than self-declaration.
Can a foreign broker open in Switzerland without a new company?
A branch licence is required of any foreign bank or securities firm employing staff in Switzerland who permanently carry out transactions or trade securities. That is a separate application from incorporating a Swiss securities firm, and the choice between the two has consequences for capital, governance and supervision.
Does a crypto trading platform need a securities firm licence?
It depends on whether the tokens traded qualify as securities and on how the venue is built. Such a platform may fall under the securities firm definition, in particular through the organised trading facility limb, or under the DLT trading facility regime. Both analyses must be carried out together before the architecture is fixed.
Sources
- Financial Institutions Act (SR 954.1), art. 17, 41 and 45
- Financial Institutions Ordinance (SR 954.11), art. 58 and 69
- Anti-Money Laundering Act (SR 955.0), art. 2
- Financial Market Infrastructure Act (SR 958.1), art. 42
- FINMA, authorisation requirements for securities firms
- FINMA, authorised institutions
Conclusion
Setting up a securities firm in Switzerland comes down to three decisions taken in the right order: establishing which of the three alternative cases the business falls into, separating the securities firm licence from portfolio management by asking in whose name the company acts, and putting CHF 1.5 million of fully paid-up capital in place on a permanent basis, with an audit firm’s verification where the contribution is in kind or an existing company is being converted. The regulator publishes the conditions; it does not tell you which status fits or what to have ready before filing. My Swiss Company incorporates and administers the company that carries the licence, from Geneva, Lucerne or Zug, alongside the counsel who handles the application.
