FINMA Circular 2008/3 Public Deposits with Non-Banks

Laupenstrasse 27, 3003 Bern
Tel. +41 (0)31 327 9100, Fax +41 (0)31 327 9101 www.finma.ch Circular 2008/3 Public Deposits with Non-Banks Commercial receipt of public deposits by non-banks within the meaning of the Banking Act Reference: FINMA-Circular 08/3 "Public Deposits with Non-Banks" Issued: 20 November 2008 Entry into force: 1 January 2009 Last amendment: 26 June 2019 [Amendments are marked with * and listed at the end of the document] Concordance: formerly EBK-Circular 96/4 "Public Deposits with Non-Banks" of 22 August 1996 Legal Basis: FINMA Act Art. 7 para. 1 lit. b Banking Act Art. 1 Banking Ordinance Art. 1–7

Addressees
Banking Act
Insurance Supervision Act
FINMA Act
Financial Market Infrastructure Act
Collective Investment Schemes Act
Anti-Money Laundering Act
Others
Banks
Financial Groups and Conglomerates
Other Intermediaries
Insurers
Insurance Groups and Conglomerates
Intermediaries
Asset Managers
Trustees
Managers of Collective Assets
Fund Management
Custodian Securities Firms
Non-Custodian Securities Firms
Trading Platforms
Central Counterparties
Central Securities Depositories
Transaction Registers
Payment Systems
Participants
SICAV
KmG for Collective Capital Investments
SICAF
Custody Banks
Representatives of Foreign Collective Capital Investments Other Intermediaries Self-Regulatory Organisations SRO-Supervised Entities Audit Firms Rating Agencies X

Table of Contents
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I. Subject Matter and Scope Rz 1–5
II. Criminal Provisions Rz 6
III. Criteria for Assessing Deposits Rz 7–30
A. Is the receipt of public deposits conducted commercially (Art. 6 para. 1–4 Banking Ordinance)?
Rz 8–9
B. Do the third-party funds have the character of deposits (Art. 5 para. 3 lit. a–f Banking Ordinance)?
Rz 10–18
C. Do the deposits originate from the public (Art. 5 para. 2 lit. a–f Banking Ordinance)?
Rz 19–30
IV. Exceptions to the Prohibition of Commercial Receipt of Public Deposits
Rz 31–34

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I. Subject Matter and Scope
Repealed 1*
The commercial receipt of public deposits is (with few exceptions) only permitted to banks which are supervised by FINMA under the Banking Act. 2 Natural or legal persons who intend to receive public deposits commercially must possess the corresponding license before commencing their activity. 3* Repealed 4* Repealed 5*
II. Criminal Provisions
Art. 46 para. 1 lit. a or para. 2 of the Banking Act criminalizes the unauthorized receipt of public or savings deposits. Similarly, the use of the designations "Bank," "Banker," or "Savings" is prohibited for non-banks (Art. 49 para. 1 lit. a or para. 2 Banking Act). Finally, providing false information to FINMA is a criminal offense (Art. 45 para. 1 or para. 2 of the Financial Market Supervision Act [FINMAG; SR 956.1]). 6
III. Criteria for Assessing Deposits
Existing deposits must be repaid if all three of the following questions (paragraphs A to C) are answered affirmatively:
7
A. Is the receipt of public deposits conducted commercially (Art. 6 para. 1–4 Banking Ordinance)?
Repealed 8*
The restriction on the receipt of public deposits to a total maximum of 1 million Swiss Francs (Art. 6 para. 2 lit. a Banking Ordinance) means that the liabilities within the meaning of Art. 5 para. 1 Banking Act towards customers or investors must not exceed 1 million Swiss Francs at any time. 8.1* Repealed 8.2* Customers must be informed individually and at the latest at the time of the commitment transaction prior to making the deposit that there is no supervision by FINMA and no deposit insurance (Art. 6 para. 2 lit. c Banking Ordinance). References merely in the General Terms and Conditions (GTC) do not meet the requirements for information obligations. Informing the customer, for example, via the company's website is permissible if the lack of supervision and deposit insurance is indicated to them in isolatable text form of verifiable nature and they explicitly confirm their knowledge of it. 8.3* Repealed 8.4*

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During the reporting period and the period for submitting the license application according to Art. 6 para. 4 Banking Act, the conditions of Art. 6 para. 2 lit. b and c Banking Act must continue to be observed. FINMA permits the further receipt of public deposits during the licensing procedure if the applicant complies with and demonstrates that the conditions of Art. 6 para. 2 lit. b and c Banking Act are met, and that

1. the repayment of the received public deposits is not endangered,
2. there is no over-indebtedness,
3. the minimum capital requirements for the requested license under the Banking Act can be met, and
4. there are no indications that would oppose the requested license under the Banking Act.
   8.5*
   Thus, in the sense of a statutory presumption and subject to Art. 6 para. 2–4 Banking Act, anyone who receives funds from more than 20 depositors or recommends themselves publicly to do so acts commercially, even if this results in fewer than 20 deposits. Those prohibited from receiving public deposits are also prohibited from advertising for this purpose (e.g., by sending prospectuses or advertisements) (cf. Art. 7 Banking Ordinance; Art. 49 para. 1 lit. c or para. 2 Banking Act). 9* B. Do the third-party funds have the character of deposits (Art. 5 para. 3 lit. a–f Banking Ordinance)? The Banking Ordinance generally assumes that all liabilities have the character of deposits. Art. 5 para. 3 lit. a–f Banking Ordinance lists the exceptions exhaustively:
   10 a) Third-party funds without loan or deposit character (Art. 5 para. 3 lit. a Banking Ordinance) Repealed 11* Funds such as a down payment in a purchase contract, an advance in an order, a rental deposit, etc., do not have the character of deposits. 12 b) Bond Obligations (Art. 5 para. 3 lit. b Banking Ordinance) Repealed 13* In contrast to an individually made interest-bearing deposit, the financial instruments mentioned in Art. 5 para. 3 lit. b Banking Ordinance represent standardized debt securities, which are explicitly excluded from Art. 1 para. 2 Banking Act if the minimum information prescribed by the Banking Ordinance is present. Single issued cash certificates do not qualify as bond obligations. 14* c) Settlement Accounts (Art. 5 para. 3 lit. c Banking Ordinance) Repealed 15*

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Such accounts serve to maintain the necessary liquidity for the settlement of customer business. The prohibition on interest for such funds aims to achieve rapid turnover, i.e., generally max. 60 days, and the quantitative limitation of such funds. Securities firms are not restricted by the 60-day period in the settlement of customer business. Art. 5 para. 3 lit. c Banking Ordinance also covers business models with a forwarding character, such as Money Transmitting, Crowdfunding, or Collection. 16* Credit balances on customer accounts of precious metal dealers fall under the exception if the precious metal dealer physically holds the precious metal credit of its customers and the customers have a right of separation in the event of the dealer's bankruptcy. In this case, precious metal dealers are not restricted by the 60-day period. 16.1* With Art. 5 para. 3 lit. c Banking Ordinance, foreign exchange dealers who maintain accounts for their customers for investment in different currencies have not fallen under the exception since 1 April 2008. Cryptocurrency dealers with comparable activities also do not fall under the exception. 16.2* d) Funds for Life Insurance and Occupational Pension (Art. 5 para. 3 lit. d Banking Ordinance) Repealed 17* The investments mentioned in Art. 5 para. 3 lit. d Banking Ordinance are permissible under other federal laws and are moreover conducted at supervised institutions. 18 e) Payment Instruments and Payment Systems (Art. 5 para. 3 lit. e Banking Ordinance) Funds contributed to a payment instrument or payment system (payment cards, internet payment options, mobile phone payment systems, etc.) do not have the character of deposits, provided that

• they serve solely for the future consumption of goods or services,
• the maximum credit balance per customer per issuer of a payment instrument or payment system operator never exceeds CHF 3,000.-, and
• no interest is paid on them. Discounts or other monetary benefits may only be granted on the goods and services and must not depend on the amount of the credit balance.
  18.1*
  C. Do the deposits originate from the public (Art. 5 para. 2 lit. a–f Banking Ordinance)?
  Again, the Banking Ordinance presumes that all deposits are public deposits. Art. 5 para. 2 lit. a–f Banking Ordinance lists the exceptions to this principle. 19 Public deposits are not deposits from:

6/8 a) Banks (Art. 5 para. 2 lit. a Banking Ordinance) Repealed 20* Foreign banks are considered companies that are authorized to receive deposits according to the law of the state under which they are organized. An example of other state-supervised companies is insurance companies. 21 b) Related Parties (Art. 5 para. 2 lit. b and c Banking Ordinance) Repealed 22* Qualified shareholders, i.e., those with more than 10% of the votes or capital (Art. 3 para. 2 lit. cbis Banking Act) and economically related persons (e.g., parent, subsidiary, or sister companies), are particularly closely related and do not need to be treated like the rest of the public. In contrast to the public, they regularly possess an information and influence advantage. 23 c) Institutional Investors (Art. 5 para. 2 lit. d Banking Ordinance) Repealed 24* This category of investors, who are not equated with the public, may include, depending on the specific circumstances, pension funds, municipalities, industrial or commercial enterprises. Professional treasury management requires at least one professionally qualified person experienced in the financial sector who is primarily responsible for permanently managing the company's financial resources. 25 d) Associations, Foundations, or Cooperatives (Art. 5 para. 2 lit. f Banking Ordinance) Repealed 26* Associations and foundations can in particular be sports clubs, nature or heritage protection associations, religious foundations, foundations for promoting home ownership, or foundations for cultural purposes. The mentioned cooperatives include, among others, production, distribution, sales, and housing cooperatives, as well as agricultural cooperatives. The circle of depositors is not restricted to members. However, deposits are considered public deposits if they are made with associations, foundations, or cooperatives whose purpose or business activity consists primarily in the receipt and interest-bearing investment of deposits. 27 With Art. 5 para. 2 lit. f Banking Ordinance, the connection of the received funds to the ideal purpose or common self-help is emphasized. For clearer delineation from banking activity, a minimum term of six months is prescribed. 27.1* e) Employees (Art. 5 para. 2 lit. e Banking Ordinance) Repealed 28* The permissible circle of investors is limited to persons actually in an employment relationship (and pensioners vis-à-vis their last employer) who make a direct investment with the employer. 29

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Deposits from a broader circle of persons, in particular the relatives of an employee (spouse and children) with the respective employer of the family member, are not permitted under Art. 5 para. 2 lit. e Banking Act. It is also not permissible to make the investment with a different legal entity than the employer (e.g., with an association, cooperative, or foundation constituted by employees of the same employer), unless the employer guarantees the deposits (see below Rz 33). 30
IV. Exceptions to the Prohibition of Commercial Receipt of Public Deposits
In addition to banks, the following institutions may receive public deposits according to Art. 3 Banking Act:

• Corporations and institutions of public law
• as well as funds for which they are fully liable.
  31
  The reason for the exception of such non-FINMA-supervised institutions lies in their solidity, considered at least equivalent, and the ultimate liability of the public sector for their obligations. 32 Additionally, operationally independent employee deposit funds are legally permissible if the common employer of the depositors guarantees the repayment of the deposits and the payment of agreed interest to the depositors. 33 The receipt of deposits is also permitted if a bank subject to the Banking Act guarantees the repayment of the deposits and the payment of agreed interest (default guarantee) (Art. 5 para. 3 lit. f Banking Ordinance). 34 Repealed 35*-37*

List of Amendments
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The circular is amended as follows:
These amendments were decided on 18.1.2010 and enter into force immediately.
Amended Rz 26, 27.1
The references to the Banking Ordinance were adapted to the Banking Ordinance of 30 April 2014.
These amendments were decided on 7.12.2017 and enter into force on 1.1.2018.
Amended Rz 3, 9, 14, 16, 16.1, 16.2
Newly inserted Rz 8.1–8.5
Repealed Rz 1, 8, 11, 13, 15, 17, 20, 22, 26, 28 Other amendments Title change before Rz 1, 8, 10, 11, 13, 15, 17, 18.1, 19, 20, 22, 24, 26, 28 The references to the Banking Ordinance were adapted to the amendments of 5 July 2017 of the Banking Ordinance. These amendments were decided on 26.6.2019 and enter into force on 1.7.2019. Amended Rz 8.5 Repealed Rz 8.2, 8.4 In the context of the entry into force of the FIDLEG/FINIG legislation on 1 January 2020, the references and terms were adapted.