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#1 Financial market supervisory law

Our client, domiciled in Switzerland, has been marketing high-quality foodstuffs for several years as a tangible asset, the refinement and quality of which is enhanced in particular by climatically special storage locations. The purchase price of the food includes professional storage as well as a helicopter flight to the storage location. At the end of the storage period, the buyer has the following three options: a) to store and ripen the asset again for a certain period of time, b) to have the asset delivered to him, or c) to sell it.  During the sale our customer supports to the best of her knowledge. 

In the spring of 2015, our client came under FINMA’s scrutiny for reasons that have not yet been disclosed by FINMA. This was followed by an informal clarification procedure with the usual questionnaires on our client’s business model and an inspection was carried out at the storage location of the tangible assets. Shortly after the inspection, FINMA opened enforcement proceedings against our client on suspicion of accepting deposits from the public on a commercial basis. With a super provisional order, it appointed an investigator with a corporate body at the company and at the same time ordered the blocking of all accounts. By provisional order, FINMA confirmed in full the protective measures ordered in the superprovisional order and withdrew the suspensive effect of any appeal. 10 months later, FINMA issued a final ruling against our client, stating that it had accepted deposits from the public on a commercial basis without a license and had thus seriously violated supervisory regulations (BankG) and ordered its liquidation.

FINMA based its rulings essentially on the following arguments: The focus of the purchase of the non-cash assets was not on their enjoyment, but on an investment. In FINMA’s view, there was also a disguised loan transaction, i.e. there was a repayment obligation. Finally, the tangible assets were insufficiently and/or inconsistently individualized. Consequently, no transfer of ownership could have taken place in favor of the buyer. 

As a result, FINMA assumed that this case – similar to BGer 2C_352/2016 of December 9, 2016 – involved a circumvention or abusive invocation of the exceptional circumstances of Art. 5 para. 3 let. a Banking Ordinance through a legal arrangement that was questionable under civil law. Consequently, our client had accepted deposits from the public on a commercial basis without possessing the necessary license.

Our lawyer and partner RA Dr. iur. Christoph Good was allowed to conduct various appeals in the proceedings, among others against the final order of FINMA. The appeal had to be filed with the Federal Administrative Court. In essence, we disputed the existence of indications that an activity was subject to licensing. In our view, FINMA had grossly misqualified the contracts used by our client. In addition, the facts of the case had been incorrectly established: Contrary to FINMA’s opinion, there was no insufficient or contradictory individualization of the tangible assets; rather, they had been legally correctly transferred to the ownership of the customers. Furthermore, we defended ourselves against the claim that there was a repayment obligation. And our customer asserted a violation of the principle of equality of rights, especially since the lower court had not taken the same action against the same business models, such as the subscription offers of wine retailers, as it had in the case of our customer.

The Federal Administrative Court begins its considerations by reproducing the most recent case law of the Federal Supreme Court on the question of the demarcation between non-cash assets and deposits from the public. Accordingly, the intended purpose of the contract is decisive for the demarcation of deposits and contracts for the transfer of property, not, for example, the designation of the contract or the cash flows by the parties involved (see also BVGer judgment B-8227/2007 of March 20, 2009 E. 5.2; BGer judgment 2A.575/2004 of April 13, 2005 E. 5.2.1 et seq. ). If the purpose of the contract corresponds to a deposit transaction in an overall economic consideration, the monetary payment is to be qualified as a deposit: It would be contrary to the protection of creditors if companies were able to evade the regulatory provisions by constructing legal structures under civil law. For the existence of a public contribution and the affirmation of the subordination obligation, however, the repayment obligation for the service received is of central importance. Accordingly, it is decisive that the contracting parties already agreed on the later repurchase of the object of purchase when concluding the contract. If a business model lacks the supporting element of the repayment obligation, there is no public contribution, which means that there can also be no circumvention of supervisory regulations.

Thus, in the specific case, the Federal Administrative Court concludes that neither the statements in the investigation report nor the documentation on which FINMA relies for its reasoning in the contested order – in particular the certificate issued and the advertising prospectuses referred to – provide any indications that our client was contractually obligated primarily to repay the deposit. 

The terms used in the various websites, such as capital investment, return, appreciation and investment, can at most suggest that our customer advertised its product as an investment opportunity, but they cannot provide any information about a primary repayment obligation. The arguments put forward by FINMA, according to which the customers would not acquire direct ownership of the purchased item, also prove to be unsuitable insofar as they do not in themselves contain any indications of a repayment obligation.

Contrary to FINMA’s opinion, the reimbursement of the purchase price provided for in the certificate, including interest of 5% p.a. in the event of a defect, represents a typical example of the purchase contractually agreed reversal relationship after a successful conversion declaration (Art. 208 para. 2 CO), which obviously indicates a secondary obligation to perform and does not fall under the concept of deposit. The same applies to the option provided for in the certificate to have the oak barrel sold by our customer in favor of the certificate holder after the minimum storage period of five years. In this case, too, there are no indications of the existence of a primary obligation to perform in the sense of a repayment obligation.

As a result, according to the ruling of the Federal Administrative Court, FINMA incorrectly assumed in the specific case that the exemption provision of Art. 5 para. 3 let. a Banking Ordinance had been improperly invoked. Consequently, the court upheld our appeal and annulled FINMA’s order. 

In summary, the present decision provides important clarifications with regard to the determination of the deposit concept relevant under supervisory law.

In practice, the subsumption under the term “investment” requires the repayment obligation of the investment that is economically in the foreground – from the investor’s point of view absolutely existing – as a central prerequisite. By attempting to construct a primary repayment obligation from the accumulation of many secondary performance obligations or elements that are not decisive on their own, FINMA undermines the applicable legislation and case law on the qualification of the concept of deposit.

For attorney Dr. iur. Christoph Good, who handled the case together with our client, it was crucial that the client worked very cooperatively with the team of attorneys. This enabled us to work through the facts together in such a way that the case was ultimately won.

Non-cash value vs. unauthorized acceptance of deposits from the public [BVerwG, B-4354/2016, judgment of November 30, 2017].