In Geneva the question almost always arrives in the same form: do we need a portfolio manager licence or a securities firm licence? Both statuses sit in the same act, both are granted by the same regulator, and they are not alike. The difference comes down to one phrase: a portfolio manager disposes of client assets in the name and for the account of clients, a securities firm trades securities in its own name for their account. From that choice follow a minimum capital of CHF 1.5 million fully paid up, a different procedure and a different supervision.
Contents
- Two statuses, one act, one phrase between them
- The three cases of the securities firm
- CHF 1.5 million, paid up and permanently maintained
- What has to exist before you file
- Life under supervision
- Market making, internal matching, tokens
- Incorporating in Geneva
- The mistakes that cost an application
- FAQ
Two statuses, one act, one phrase between them
Start with the distinction, because it governs everything else and because the regulator, which documents each status on its own page, never compares them.
A portfolio manager is someone 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. The client remains the contracting party, and the manager exercises a mandate over assets that never pass through its balance sheet.
A securities firm trades securities in its own name for the account of clients. Your company becomes the counterparty, carries the settlement, and appears as such to the market.
If the plan is to manage portfolios under mandate, the first status applies, and our guide on becoming an asset manager in Geneva covers it. If the company places orders in its own name, the second applies, and that is the subject of this page.
The three cases of the securities firm
| Case | Situation covered |
|---|---|
| a | Trading in securities in its own name, for the account of clients |
| b | Short-term trading for its own account, principal activity on the financial market, plus one of: a risk to the proper functioning of that market, membership of a trading venue, or operation of an organised trading facility |
| c | Short-term trading for own account with prices quoted to the public, permanently or on request (market maker) |
Source: Financial Institutions Act (SR 954.1), art. 41, consolidated version in force. Only the German, French and Italian texts are authoritative.
The three cases are alternatives: meeting one is enough. Case a is the broker in the ordinary sense. Cases b and c capture proprietary trading, but never on its own: systemic relevance, venue membership, operation of an organised trading facility or public quoting has to be added.
The practical consequence for a desk being set up: proprietary trading that joins no venue, quotes nothing publicly and is not principally active on the financial market stays outside the definition. The day it joins a venue, it moves inside.
CHF 1.5 million, paid up and permanently maintained
The act requires a fully paid-up minimum capital and leaves the figure to the Federal Council. The 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.
That last word carries the weight. This is not an amount contributed at incorporation and then consumed: the requirement is continuous, and capital eroded by early losses cannot be restored the week before a review.
Two very practical situations call for a third party. 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 to the conversion of an existing company into a securities firm, a common route for an established business and the point most often discovered late in the timetable.
For securities firms organised as partnerships, capital comprises the capital accounts and the assets of partners with unlimited liability, the latter counting towards the minimum only where a declaration establishes the conditions. The same ordinance sets the minimum capital of fund management companies at CHF 1 million, a useful comparison.
Your securities firm in Geneva
FINMA reviews a file, but it looks first at a company
Incorporating the AG and paying up the CHF 1.5 million, coordinating the licensed audit firm’s verification where the contribution is in kind or an existing company is being converted, statutory auditor, governance and minutes, accounting and the Geneva substance a supervised institution must be able to demonstrate: RISTER® sets up and administers the company, alongside the regulatory counsel who files the application.
Request a meeting
RISTER – Fiduciary in Geneva, reply within one business day.
What has to exist before you file
The conditions FINMA publishes always come back to the same elements: fully paid-up minimum capital, a business plan demonstrating compliance with capital adequacy and risk diversification rules, an organisation matched to the activity carried on, adequate risk management and internal controls, and persons responsible for administration and management who guarantee proper business conduct.
What the list does not convey is the order. The application is filed by a company that exists, whose capital is paid up, whose statutory auditor is appointed and whose organisation is written down. The three workstreams, corporate, banking and regulatory, advance together, and the slowest sets the timetable. Projects that fall behind are almost always those that began with the regulatory file expecting to sort the company out afterwards.
Note finally that a branch licence is required of any foreign bank or securities firm employing staff in Switzerland who permanently carry out trading activity. For a foreign broker, opening a Geneva desk and incorporating a Swiss securities firm are two different routes with different consequences.
Life under supervision
A securities firm is a financial intermediary under the Anti-Money Laundering Act purely by virtue of its status. Due diligence, documentation and reporting duties therefore apply from the first client, and they are checked.
Ongoing prudential supervision follows: an audit firm reporting to FINMA, permanent compliance with the authorisation conditions including capital, and notifications where anything material changes. The list of authorised institutions also distinguishes account-holding securities firms from non-account-holding ones, according to whether client assets are held, with the consequences that follow.
Market making, internal matching, tokens
Three configurations sit on the boundary and deserve checking before the architecture 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. A liquidity provision agreement can fall within it without ever using the term.
Internal matching. Case b refers to operating an organised trading facility. A company that crosses client orders internally may be operating one without having designed it as such.
Tokens. Where the tokens traded are securities, the venue may fall under the securities firm definition through the organised trading facility limb, or under the DLT trading facility regime. Both analyses are carried out together.
Incorporating in Geneva
The capital requirement makes the company limited by shares the practical choice. The full sequence is in our checklist to set up a company in Geneva, the comparison of forms in our guide to creating a GmbH or an AG in Geneva, and the budget in what forming a Swiss company costs.
Substance is not negotiable for a supervised institution. The company is expected to be run from Switzerland, its governing bodies to meet, decisions to be taken and documented here, and the responsible persons to be assessable on reputation and professional record. That is also what separates a real Geneva establishment from an address, and a business centre in Geneva is a starting point rather than an answer.
Governance carries weight here, since the board answers for the risks described above, as set out in the responsibilities and duties of the board. The banking relationship should be prepared early, following our guide to opening a bank account in Switzerland, and cantonal taxation is mapped in Swiss taxation.
The mistakes that cost an application
- Choosing the status from industry vocabulary. The word broker designates no Swiss status: the question is in whose name the company acts.
- Seeing the capital as an initial contribution. It is maintained permanently.
- Forgetting the licensed audit firm’s verification where the contribution is in kind or an existing company is converted.
- Starting with the regulatory file. It is filed by a company already incorporated and organised.
- Treating substance as a tax question. For a supervised institution it is an authorisation condition.
FAQ: setting up a securities firm in Geneva
Securities firm or portfolio manager: how do we choose?
By establishing in whose name the company acts. A portfolio manager disposes of client assets in the name and for the account of clients under a mandate. A securities firm trades securities in its own name for their account and therefore becomes the counterparty. The two statuses require separate FINMA licences and differ in capital, shareholder notification and supervisory set-up.
What minimum capital is required?
At least CHF 1.5 million, fully paid up and maintained permanently. Where the company is founded by contributions in kind, or an existing company is converted, the value of the assets contributed and the liabilities assumed are verified by a licensed audit firm. Fund management companies, by comparison, require CHF 1 million.
Is proprietary trading alone enough to require this licence?
No, not by itself. Short-term trading on own account must be combined with a principal activity on the financial market and one of the following: a risk to the proper functioning of that market, membership of a trading venue, or operation of an organised trading facility. Market making is a separate case.
How long should we allow?
It depends on the quality of the file and the state of the company when it is filed. The application is made by an entity already incorporated, with capital paid up, a statutory auditor appointed and its organisation written down. Corporate, banking and regulatory work run in parallel, and the slowest of the three sets the timetable.
Do anti-money laundering duties apply?
Yes, as a financial intermediary, by virtue of the status itself. Due diligence, documentation and reporting duties apply from the first business relationship and are subject to supervision rather than self-declaration.
Can a foreign broker operate from Geneva without a Swiss company?
A branch licence is required of any foreign bank or securities firm employing staff in Switzerland who permanently carry out trading activity. That is a separate route from incorporating a Swiss securities firm, and the choice affects capital, governance and supervision.
Sources
Conclusion
Setting up a securities firm in Geneva begins with a question of qualification, not of paperwork: in whose name does the company act? If it places orders in its own name for the account of clients, this is the status, with CHF 1.5 million fully paid up and permanently maintained, a licensed audit firm’s verification where the contribution is in kind or an existing company is converted, and continuous prudential supervision. If it acts in its clients’ name under mandate, it is portfolio management. RISTER® incorporates and administers the Geneva company that will carry the licence, from the commercial register entry to the accounts and payroll, alongside the counsel who takes the application to FINMA.
