FINMA Circular 2025/2 Conduct Requirements under the Financial Services Act and Financial Services Ordinance

Laupenstrasse 27 3003 Bern Tel. +41 (0)31 327 91 00 www.finma.ch Circular 2025/2 Conduct Requirements under FIDLEG/FIDLEV Implementation of Conduct Requirements under FIDLEG/FIDLEV for Financial Service Providers Reference: FINMA-Circular 25/2 "Conduct Requirements under FIDLEG/FIDLEV" Issued: 31 October 2024 Entry into force: 1 January 2025 Legal Basis: FINMAG Art. 7 para. 1 lit. b FIDLEG Art. 3, 8, 9, 11, 12, 19, 25, 26 FIDLEV Art. 3, 7, 9, 10, 12, 16–17, 24–28, 29 Addressees (indicative information) BankG VAG FINIG FinfraG KAG GwG Others Banks Financial Groups and Conglomerates Persons under Art. 1b BankG Other Intermediaries Insurers Ins. Groups and Conglomerates Brokers Asset Managers Trustees Managers of Collective Assets Fund Management Custodial Securities Houses Non-custodial Securities Houses Trading Venues Central Counterparties Central Securities Depositories Transaction Registers Payment Systems Participants SICAV KmG for KKA SICAF Custody Banks Representatives of Foreign KKA Other Intermediaries SRO SRO-Supervised Audit Firms Rating Agencies X

Table of Contents 2/6 I. Subject Matter II. Scope III. Definitions IV. Conduct Rules and Organisation A. Duty to Inform a) Information on the Type of Financial Service b) Information on Risks Associated with Financial Instruments c) Information on Risks Associated with the Financial Service B. Appropriateness and Suitability Assessment C. Use of Customers' Financial Instruments / Securities Lending D. Conflicts of Interest E. Compensation from Third Parties / Retrocessions V. Transitional Provisions Rz 1 2 3 4–29 4–12 4 5–8 9–12 13–14 15–22 23–25 26–30 31

3/6 I. Subject Matter This circular describes the requirements for implementing the conduct requirements under the Financial Services Act of 15 June 2018 (FIDLEG; SR 950.1) and the Financial Services Ordinance of 6 November 2019 (FIDLEV; SR 950.11) when providing financial services. In addition to the conduct rules in the narrow sense (Art. 7–20 FIDLEG), these conduct requirements include the provisions on the organisation of financial service providers (Art. 21–27 FIDLEG) as well as the general definitions (Art. 3 FIDLEG) and specifications for customer categorisation (Art. 4 and 5 FIDLEG), which determine which conduct requirements apply in individual cases. II. Scope This circular is addressed to financial service providers supervised by FINMA or a supervisory organisation under Art. 43a of the Financial Market Infrastructure Act of 22 June 2007 (FINMAG; SR 956.1) within the meaning of Art. 2 para. 1 lit. a FIDLEG ("financial service providers"). III. Definitions The exception regarding the placement of financial instruments under Art. 3 para. 3 lit. b FIDLEV applies to services provided to companies and their shareholders as participants who finance themselves via the capital market. In contrast, the offering of these financial instruments to investors or their sale to customers falls within the scope of application of FIDLEG. IV. Conduct Rules and Organisation A. Duty to Inform (Art. 8–9 FIDLEG, Art. 7 and 12 FIDLEV) a) Information on the Type of Financial Service (Art. 8 para. 2 lit. a and 9 FIDLEG, Art. 7 para. 1 lit. a and 12 FIDLEV) Financial service providers must appropriately identify and document the type of investment advisory service (transaction-related or portfolio-related) to their customers (e.g., by means of a written contract or another form that enables proof by text, or by a documented explanation at the time of advice). b) Information on Risks Associated with Financial Instruments (Art. 8 para. 1 lit. d FIDLEG, Art. 7 para. 3 lit. b FIDLEV) When disclosing risks regarding derivative contracts, the financial service provider must inform: • about any margin call obligations and the potentially unlimited risk of loss; • about leverage, the functioning of margin, counterparty risk, and market risk (including slippage); 1 2 3 4 5 6 7

4/6 • quarterly about the percentage (%) of retail customers who, in the last 12 months: • lost money with derivative contracts; • suffered a total loss of their margins upon closing their positions; • had to pay a negative balance after closing their positions. c) Information on Risks Associated with the Financial Service (Art. 8 para. 2 lit. a FIDLEG, Art. 7 para. 2 FIDLEV) Unless market-unusual risk concentrations in customer portfolios are excluded in asset management and portfolio-related investment advice, the financial service provider must point out the nature and extent of concentration risks. Indicators of market-unusual risk concentrations include, for example: • Concentrations of 10% or more in individual securities; • Concentrations of 20% or more in individual issuers. Concentrations resulting from collective investment schemes subject to regulatory risk distribution provisions are exempt. B. Appropriateness and Suitability Assessment (Art. 11–12 FIDLEG, Art. 16–17 FIDLEV) When creating a customer risk profile, financial service providers must inquire about all information necessary for a proper conduct of the appropriateness and suitability assessment. In particular, the financial service provider must inquire about the knowledge and experience of its customers for each relevant investment category applicable to the financial service. In asset management and portfolio-related investment advice, this must be done taking into account the characteristics of the investment strategy and the types of financial instruments used. The granularity of the inquiries must be adapted to the complexity and risk profile of the investments as well as to the investment strategies that may apply in the financial service. C. Use of Customers' Financial Instruments / Securities Lending (Art. 19 FIDLEG) The information to be provided and documented to customers as part of risk disclosure must include at least: • whether the financial service provider acts as principal (counterparty) or merely as an agent brokering the transaction with a third party; • that ownership of the financial instruments transfers to the counterparty and only a claim for recovery of identical type and quantity exists; • that in the event of the counterparty's insolvency, or possibly a guarantor's insolvency, only a claim for an unprivileged monetary claim of corresponding value exists (in securities lending with retail customers, there is additional coverage up to the amount of collateral received); 8 9 10 11 12 13 14 15 16 17 18

5/6 • that the ownership and voting rights transfer to the counterparty; • that the risk of a decrease in the value of the financial instruments remains with the customer; • that the customer can terminate the agreement on the use of financial instruments with immediate effect, or, if a fixed term has been explicitly agreed in individual cases, that the use ends only upon the expiry of the agreement on the use of financial instruments; • that the customer has the option to exclude certain financial instruments from securities lending. D. Conflicts of Interest (Art. 8 para. 2 lit. b and c in conjunction with Art. 25 FIDLEG, Art. 9–10 and 24–28 FIDLEV) Financial service providers must inform customers whether the market offer considered in the selection of financial instruments comprises only own, own and third-party, or only third-party financial instruments. If financial service providers inform customers that they consider both own and third-party financial instruments, they must take appropriate measures to avoid associated conflicts of interest, such as a process for selecting financial instruments based on industry-standard, objective criteria. Own financial instruments must not be favoured by specific incentives in the remuneration of personnel involved in these financial services. Customers must be specifically made aware of unavoidable conflicts of interest arising from the consideration of the financial service provider's own financial instruments. E. Compensation from Third Parties / Retrocessions (Art. 26 FIDLEG, Art. 29 FIDLEV) The information on compensation in standard contracts must be visually highlighted and must be physically available to the customer or easily electronically accessible. If the actual amount of compensation cannot be determined before the provision of the financial service or before contract conclusion, the financial service provider must inform the customer: • about the ranges of compensation regarding different classes of financial instruments; • in asset management and portfolio-related investment advice, additionally about the ranges of compensation based on the portfolio value and the agreed investment strategy. Financial service providers must generally disclose the actually received amounts to customers free of charge upon request. 19 20 21 22 23 24 25 26 27 28 29 30

6/6 V. Transitional Provisions For the implementation of Rz 8, 9–12 and 24–25, 26, there is a transitional period of 6 months until 30 June 2025. 31