Employment in Financial Services

Under Swiss civil law, there is no requirement to apply pre-screening measures. However, while not a statutory requirement under Swiss financial market laws per se, companies subject to these laws apply pre-screening measures to ensure that a prospective financial services employee meets the requirements set forth by these laws. In particular, regulated companies such as banks, securities firms, insurance companies, fund management companies, managers of collective investment schemes and asset managers are required to obtain authorisation from the Swiss Financial Market Supervisory Authority (FINMA) relating to strategic and executive management and each change thereto.

As a general rule, the higher the responsibility or position of a person, the more requirements financial services employees may need to fulfil. Persons holding executive or overall management functions (eg, a member of the board or members of the senior management) are required to fulfil certain requirements set forth by the applicable Swiss financial market regulations. Such requirements may include providing current CVs showing relevant work experience and education as well as excerpts from the debt and criminal register. It may also include providing various declarations (eg, concerning pending and concluded proceedings, qualified participations and other mandates). Furthermore, financial services employees holding certain control functions (eg, compliance officer, risk officer and their deputies) may also be required to prove that they are suitable for the position by providing, for example, a current CV showing relevant work experience and education.

For employees subject to the SMR, anyone performing an SMF must be pre-approved by the relevant regulator before they can start their role. Generally, firms that wish to employ a senior manager must first carry out sufficient due diligence to satisfy themselves that the candidate is a fit and proper person to perform their proposed functions. In this regard, firms must consider the individual’s qualifications, training, competency and personal characteristics. The firm must also carry out a criminal records check. They may then apply to the relevant regulator for that candidate’s pre-approval. In the firm’s application, all matters relating to the candidate’s fitness and propriety must be disclosed. The firm must also enclose a statement of that individual’s proposed responsibilities and (depending on the firm) the latest version of the firm’s management responsibilities map.

For employees subject to the CR, before the appointment and annually thereafter, these employees must be certified by the employing SM&CR firm as being fit and proper. Certification does not involve pre-approval by the FCA or PRA.

Additionally, firms must comply with the regulatory reference rules for all candidates subject to either the SMR or CR before their employment. These rules require employing firms to request a regulatory reference from all previous employers covering the past six years of employment. Information must be shared between regulated firms using a particular template, which includes information relevant to assessing whether a candidate is fit and proper. Firms are also expected to retain records of disciplinary and fit and proper findings going back six years for their employees (or longer for findings of gross misconduct), and they must update regulatory references that they have previously given where new significant information comes to light that would impact the content of a previously given regulatory reference.

No special contractual documents are required when engaging employees within the financial services industry.

However, it is generally recommended to conclude a written employment contract with each employee. FINMA, for instance, requires a copy of employment contracts concluded with senior management of regulated entities.
In particular, the employment contract should reference the employer’s (regulatory) set of directions and the employee’s obligation to comply with said instructions. In addition, because regulated companies such as banks, securities firms, fund management companies, managers of collective assets or asset managers are required to obtain authorisation from FINMA before the engagement of key personnel, it may be sensible to include a condition precedent relating to FINMA’s acceptance of the relevant employee in the employment contract.

The mandatory, partially mandatory, and optional elements of an individual employment contract are outlined in article 319 et seq of the CO (in particular regarding remuneration, working time, vacation, and incapacity for work). Further regulations may apply based on collective bargaining agreements.

As a matter of general UK employment law, employers must give employees written particulars of certain terms and conditions of employment. This is known as a “section 1 statement” after section 1 of the Employment Rights Act 1996, which sets out the mandatory information that employers must give to employees no later than the first day of their employment. This includes fundamental information such as the names of the employer and employee; the date of commencement of employment; the rates and timing of pay; and working hours. Other prescribed particulars (such as information regarding pensions, collective agreements and training) can be provided to employees in instalments within two months of commencement of employment. Typically, a written employment contract will contain the relevant information to satisfy these requirements.

Financial services employers should ensure that, in addition, their employment contracts reinforce the requirements of SM&CR. This will help the employer manage the employment relationship in a manner compliant with SM&CR and demonstrate to the relevant regulators the employer’s commitment to compliance with SM&CR. The employment contract will usually include, therefore, additional provisions regarding the completion of SM&CR-compliant background checks; confirmation of the employee’s regulated function (eg, their SMF or certification function); required regulatory standards of conduct; cooperation with fitness and propriety assessments; and tailored termination events.

In addition, all senior managers must have a statement of responsibility setting out their role and responsibilities. Certain firms must also allocate certain regulator-prescribed responsibilities (prescribed responsibilities) among senior managers. It is common to set out a senior manager’s regulatory responsibilities in their employment contract.

Dual-regulated firms must also ensure that individuals approved to carry out a PRA-designated SMF are subject to any specific contractual requirements required by the PRA. For example, depending on the type of firm, a firm may be required to ensure that the relevant individual is contractually required to comply with certain standards of conduct, such as to act with integrity and with due care and skill (among other requirements).

Non-disclosure agreements (NDAs) are generally lawful in Switzerland. However, NDAs are not regulated by statutory law and therefore do not have to follow any particular statutory form or rule. Nevertheless, most NDAs often contain a similar basic structure.

The core clauses of an NDA concern:

• manufacturing and business secrets or the scope of further confidentiality;
• the purpose of use;
• the return and destruction of devices containing confidential information; and
• post-contractual confidentiality obligations.

As a general rule, it is recommended to use the written form.

To ensure possible enforcement of an NDA in the employment context, the requirements of a post-contractual non-compete obligation (see below) must be met.

NDAs (also known as confidentiality agreements) are potentially lawful and enforceable in the UK. It is common to include NDAs in employment contracts (to protect the confidential information of the employer during and after employment) and in settlement agreements (to reiterate existing confidentiality obligations and to keep the circumstances of the settlement confidential).

NDAs do not need to follow a particular form, but they must be reasonable in scope. Following #MeToo, there has been considerable government, parliamentary, and regulatory scrutiny of the use of NDAs and their reasonableness in different circumstances.

The following limitations on NDAs should be noted:

• By law, any NDA purporting to prevent an individual from making a “protected disclosure” as defined in the Employment Rights Act 1996 (ie, blowing the whistle about a matter) is void.

• The regulatory body for solicitors in England and Wales, the Solicitors Regulation Authority (SRA), has issued a detailed warning notice and guidance to practitioners setting out – in its view – inappropriate or improper uses of NDAs. Failure to comply with the SRA’s warning notice may lead to disciplinary action. The SRA lists the following as examples of improper use of NDAs:

• • using an NDA as a means of preventing, or seeking to impede or deter, a person from:
    • cooperating with a criminal investigation or prosecution;
    • reporting an offence to a law enforcement agency;
    • reporting misconduct, or a serious breach of the SRA’s regulatory requirements, to the SRA, or making an equivalent report to any other body responsible for supervising or regulating the matters in question; and
    • making a protected disclosure;
    • using an NDA to influence the substance of such a report, disclosure or cooperation;
    • using an NDA to prevent any disclosure required by law;
    • using an NDA to prevent proper disclosure about the agreement or circumstances surrounding the agreement to professional advisers, such as legal or tax advisors, or medical professionals and counsellors, who are bound by a duty of confidentiality;
    • including or proposing clauses known to be unenforceable; and
    • using warranties, indemnities and clawback clauses in a way that is designed to, or has the effect of, improperly preventing or inhibiting permitted reporting or disclosures being made (for example, asking a person to warrant that they are not aware of any reason why they would make a permitted disclosure, in circumstances where a breach of warranty would activate a clawback clause).
       
• The Law Society of England and Wales, a professional association representing solicitors in England and Wales, has issued similar guidance (including a practice note) on the use of NDAs in the context of the termination of employment relationships.
• Other non-regulatory guidance on the use of NDAs has also been issued, including by the Advisory, Conciliation and Arbitration Service and by the UK Equality and Human Rights Commission.

Care should be taken accordingly to ensure that the wording of any NDA complies with prevailing guidance, especially from the SRA.