The BFSA client test: which UK clients a Swiss firm may take on

The client test is the regime

The mechanics of the Agreement of 21 December 2023, in force between the two states since 1 January 2026, are often described as recognition of Swiss supervision, which is accurate but incomplete. Under Annex 5, Section VIII paragraph A.1, the United Kingdom defers to Swiss authorisation and prudential measures only in respect of the supply of covered services, by covered financial services suppliers, to covered clients, and only to the extent specified in the sectoral annex. Deference is granted for a combination of service, instrument and client; a firm as such is never the object of it. The notification a Swiss firm files through FINMA and the entry the FCA then makes on its register both record that combination: which covered service, in relation to which covered financial instrument, for which category of covered client.

The consequence is exacting. A portfolio management mandate accepted from a UK client who does not fall inside one of the three categories is not a technical breach of a conduct rule. It falls outside the route the Agreement creates, and the firm is then left to establish that the business is lawful on some other basis: another exclusion in the Regulated Activities Order, the overseas persons exclusion, or UK authorisation. If none applies to activity carried on in the United Kingdom by way of business, the general prohibition in section 19 of the Financial Services and Markets Act 2000 is in play, and that is a criminal and civil exposure well beyond a supervisory conversation.

The FCA and the PRA describe registered Swiss firms as operating under an exclusion from the general prohibition without UK authorisation, and the UK implementing instrument, the Financial Services and Markets Act 2023 (Mutual Recognition Agreement) (Switzerland) Regulations 2025, amends the Regulated Activities Order and the Financial Promotion Order and equips the two regulators with a register, information-gathering powers, product intervention powers, a power to impose prohibitions and restrictions, a prudential safeguard and a wind-down regime. The client definition is central to all of it.

Three client sets, and the absent elective professional client

Section V paragraph A of Annex 5 lists the clients resident or established in the United Kingdom whom a Swiss firm may serve under the Agreement. First, high net worth covered clients, defined by the Agreement itself in three variants examined below. Second, per se professional clients as defined under UK domestic law: entities required to be authorised or regulated to operate in the financial markets, large undertakings, national and regional governments and international and supranational institutions, and other institutional investors whose main activity is investing in financial instruments. Third, eligible counterparties as defined under UK domestic law: investment firms, credit institutions, insurance companies, authorised collective investment schemes and their management companies, pension funds and their management companies, other financial institutions authorised or regulated under UK law, national governments and their corresponding offices including public bodies dealing with public debt at national level, and supranational organisations.

The absent category is the elective professional client. UK client categorisation contains a route by which a retail client may, on request and subject to the conditions in the FCA Handbook, be treated as an elective professional client. The Agreement does not adopt that route. It refers to per se professional clients, and FINMA states the point from the Swiss side in its guidelines of 8 January 2026: retail clients who do not satisfy the high net worth test do not constitute covered clients. A UK client who has opted up therefore enters the Agreement only if it independently qualifies as a per se professional client, an eligible counterparty, or a high net worth covered client on the Annex 5 test.

Two classification systems consequently run in parallel in the same client file. Swiss conduct duties under the Federal Act on Financial Services determine what the firm owes the client in Switzerland. Annex 5 determines whether the firm may serve that client in the United Kingdom at all. A Swiss opting-out declaration under Article 5 of that Act is evidence for the first question and irrelevant to the second. A firm that maps its UK book by reference to its existing FinSA segmentation will overstate its eligible population, and the overstatement concentrates at the boundary between wealthy private clients and the structures created for them.

Two further limits attach to the whole list. The client must be resident or established in the United Kingdom, so a Swiss firm cannot use the Agreement to reach a client elsewhere merely because the relationship is booked through a UK adviser. And the categories are defined by reference to UK domestic law: the tests for a large undertaking, a per se professional client and an eligible counterparty are those in the FCA Handbook, currently in COBS 3 on client categorisation.

Which version of the Handbook governs needs care. Article 44 of the Agreement provides that, unless otherwise specified, references to the domestic laws of the parties refer to those laws as in force at the date of signature, 21 December 2023, and Annex 5 does not specify otherwise for the client categories. Treaty eligibility may therefore be anchored to the Handbook as it stood at signature, while the firm's own UK obligations, and any supervisor reading the register, are measured against the Handbook in force today. We discuss the point separately. The practical course is to satisfy both: classify against the current Handbook definitions, confirm that the outcome would be the same under the December 2023 text, and re-check categorisations periodically as part of running the book.

The high net worth test: three routes, three different files

Section V paragraph A.1 sets out three routes into high net worth covered client status. They differ in more than the wealth threshold. Each allocates the capability assessment and the signatures to different people, and a file assembled on the wrong route will fail on inspection even where the client's wealth is not in doubt.

The first route is the natural person. The individual must have net assets in excess of GBP 2,000,000; must, in light of the services and the nature of the related transactions, be capable of making his or her own investment decisions and understanding the risk involved; and must declare in writing, in a standalone document, both that he or she wishes to be treated as a high net worth covered client in respect of a particular covered service and that he or she is aware that the protections and investor compensation rights normally available under UK domestic law will not be available, and is aware of the consequences.

The second route is the private investment structure with professional treasury operations, meaning a structure with at least one qualified expert with appropriate professional skills in financial matters to whom a natural person entrusts principal responsibility for managing his or her assets on a continuous basis. Here the net-asset test applies to the underlying natural person, who must be resident in the United Kingdom, but the capability assessment applies to the person authorised to carry out transactions on behalf of the structure. Both declarations, the awareness of lost protections and the wish to be treated as a high net worth covered client, are made by an officer of the structure.

The third route is the private investment structure with no qualified expert, through which the natural person will invest. The net-asset test again applies to the underlying UK-resident natural person, and so does the capability assessment. The declarations split: the natural person makes the standalone declaration of awareness that UK protections and compensation rights are lost, while an officer of the structure declares that the structure wishes to be treated as a high net worth covered client.

The firm's own duties are set out in Annex 5 Section IX paragraph A.3, which for each route requires it to satisfy itself as to net assets, to undertake an adequate assessment of expertise, experience and knowledge giving reasonable assurance in light of the services and the nature of the related transactions, and to take the declaration and warning steps described above. The guidelines for firms published jointly by the FCA and the PRA, first issued in November 2025 and updated in December 2025 and January 2026, restate those tests in operational language. Two points deserve emphasis. The duty to satisfy itself as to net assets reads as a verification duty; it is not permission to rely on a client's assertion. And the capability assessment must be adequate in light of the services and the nature of the related transactions, which means it is service-specific: an assessment performed for an execution-only relationship does not carry across to a discretionary mandate or to derivatives.

Net assets: a defined term

Section VII of Annex 5 defines net assets for the Swiss-into-UK direction as property, rights, entitlements or interests, with four exclusions. The first is the property that is the client's primary residence, together with any money raised through a loan secured on that property. The second is rights under a long-term contract of insurance, unless the contract is a reinsurance contract or satisfies a pure-protection test: benefits payable only on death or in respect of incapacity due to injury, sickness or infirmity, no surrender value or a single-premium contract whose surrender value does not exceed that premium, and no provision for conversion or extension that would take it outside those conditions. The third is benefits in the form of pensions or otherwise payable on termination of service, death or retirement, to which the client or the client's dependants are or may be entitled. The fourth is withdrawals from the client's pension savings, except where the withdrawals are used directly for income in retirement.

One feature of the definition deserves a note. The term is Net Assets, but the definition is drafted as a list of included property with four exclusions, and it does not expressly address the deduction of liabilities beyond removing money raised through a loan secured on the primary residence. Neither supervisor's guidelines resolve the point. The conservative reading, and the one we would document, is to compute the figure net of the client's liabilities and to record the basis used, so that the file shows a deliberate methodology and not an arithmetic assumption.

Read against a typical private client balance sheet, the definition narrows the population sharply. A London client with a house worth GBP 3,000,000, a self-invested pension of GBP 1,500,000 and an investment portfolio of GBP 900,000 has, on any ordinary use of language, well over GBP 2,000,000. On the Agreement's definition the residence and the pension both drop out and the client fails. Two drafting details compound the point. The threshold is net assets in excess of GBP 2,000,000, not at least that amount, so a client at exactly the figure is outside. And the test is expressed in sterling for the inbound direction, which imports a currency risk into every borderline file where the assets are held in Swiss francs or euros: the computation needs a stated conversion basis and a date, and it needs to be revisited when the firm adds a covered service and takes fresh declarations.

The reverse direction is not a mirror image, and firms working both ways should not assume it is. For services supplied from the United Kingdom into Switzerland, Section V paragraph B.3 admits high net worth clients under Article 5 paragraph 2 letter b of the Federal Act on Financial Services who have declared that they wish to be treated as professional clients and who have assets at their disposal of at least CHF 2,000,000 as defined in Article 5 paragraphs 1 and 2 of the Federal Ordinance on Financial Services of 6 November 2019. Different currency, different threshold formula, different measure of assets and a different underlying legal test.

The declarations are the file

Every one of the three high net worth routes requires declarations made in a standalone document, separate from the contract, and made in respect of a particular covered service. Folding the status declaration into the general terms of business or the account agreement defeats the requirement on its face; a standalone document may travel in the same onboarding pack, provided it is a distinct document signed separately from the contract. Adding a covered service later requires fresh declarations for that service and, where that service is not already within the firm's register entry for the relevant instrument and client category, a fresh notification to the register, as set out below.

There is also a pre-contractual disclosure obligation, and it is in the Agreement itself. Annex 5 Section IX paragraph A.1 requires the firm to provide each covered client, in good time, with a disclosure document stating clearly and prominently: that the firm is incorporated or formed under Swiss law; that it is authorised and supervised in Switzerland; that it is not authorised or regulated in the United Kingdom, or, if it holds a Part 4A permission, that it is not authorised in the United Kingdom for the services notified under the Agreement; the place of jurisdiction and the applicable law of the contract; and that neither the UK compensation scheme nor the Financial Ombudsman Service is available. The FCA may exclude the requirement to disclose some or all of these matters for specified categories of covered clients (Section X paragraph A.5.b); we are not aware that it has done so.

The last two items are the substance of what the client gives up, and they are the reason the Agreement requires the client's acknowledgement of lost protections in a document separate from the contract. The pre-contractual disclosure is the firm's statement and the acknowledgement is the client's; the Agreement requires the latter to stand apart from the contract, not from the disclosure. They do two different jobs, and a client pack that treats the client's acknowledgement as a receipt of the disclosure has missed the distinction.

One further condition deserves attention at the drafting stage. Before providing covered services, the firm must obtain the client's consent to relevant information being disclosed to UK regulators in response to a request, covering information held or controlled by the firm about the supply of covered services to that client, including personal data and information subject to a client confidentiality obligation. The requirement is in Annex 5 Section IX paragraph A.4: the consent must be obtained before any covered service is supplied (A.4.a); it covers disclosure in response to a request made by a UK supervisor directly to the firm under Section X paragraph A.3.d, a power that opens once supervisory dialogue with FINMA has not resolved a matter; and if the client withdraws the consent, the firm may no longer supply the covered services to that client (A.4.b). The FCA and PRA guidelines restate the point at paragraph 2.20.

A withdrawal is therefore a termination event in substance, and the client documentation should say so and set out what happens to open positions, mandates and custody arrangements when it occurs. Treating the consent as a data protection formality leaves the firm without a contractual path out of a relationship it is no longer permitted to service.

The Agreement reaches the classification exercise itself

Section III paragraph A.a.viii of Annex 5 deserves particular attention. Communications made to or directed at natural persons resident in the United Kingdom and their agents, and at private investment structures established in the United Kingdom, in order to ascertain whether such a person qualifies as a high net worth covered client, are themselves a covered service. The consequence is that the prospecting conversation can be brought inside the perimeter: a Swiss firm cannot rely on the Agreement for the approach that establishes whether a UK prospect is eligible unless it has notified that activity and been registered for it.

Not every enquiry needs a basis. In the FCA's view, a neutral question about a person's status, with a brief statement of why it is asked, is not an inducement to engage in investment activity unless it involves persuasion or incitement (PERG 8.4.27). Prospecting conversations rarely stay that neutral, and once they do not, the firm needs either the registered activity or a separate UK basis, which returns it to the analysis it was trying to avoid, including the financial promotion restriction in section 21 of the Financial Services and Markets Act 2000. The financial promotion exemption that the UK implementing legislation gives registered firms, article 73ZB of the Financial Promotion Order, covers communications to persons the firm reasonably believes are covered clients, as the FCA describes it at PERG 8.14.40E, so the file should record the basis for that belief before any promotional approach. FINMA flags the point in its guidelines because the status of a prospect frequently cannot be established without asking.

The practical implication for the notification form is that a firm building a UK private-client book should notify this communication activity at the outset, before the gap surfaces after the first meeting.

Two related boundaries complete the perimeter. The covered financial instruments are a closed list in Section VI paragraph A, all as defined under UK domestic law: transferable securities, money market instruments, collective investment schemes or alternative investment funds including money market funds, and options, futures, swaps, forward rate agreements and other derivative contracts that are financial instruments. Anything outside that list falls outside the Agreement even where the service and the client would qualify.

Separately, ancillary services listed in Section III paragraph A.b, including safekeeping and administration, credit granted to allow a transaction, advice on capital structure, advice and services relating to mergers and acquisitions, connected foreign exchange services and investment research, may be supplied on a standalone basis, which is a meaningful widening of access for custodians and research providers. The safekeeping limb carries its own carve-outs: it excludes providing and maintaining securities accounts at the top-tier level by central securities depositories, and the provision of depository services to funds which are required under UK domestic law to be provided by a legal entity incorporated in the United Kingdom (Section III paragraph A.b.i).

Marketing of alternative investment funds to covered clients continues to run through the UK national private placement regime and not through the Agreement, and this is deliberate: the deference list carves marketing requirements relating to collective investment schemes and alternative investment funds out of the marketing measures the United Kingdom defers to. Two consequences follow. A high net worth covered client under the Agreement is, for UK domestic purposes, ordinarily still a retail client, so the private placement regime does not by itself open the door: where marketing to that client falls within the financial promotion restriction in section 21 or the scheme promotion restriction in section 238 of the Act, regulation 46 of the Alternative Investment Fund Managers Regulations 2013 permits marketing to a retail investor only if it is done without breaching those restrictions.

Nor is covered client status under the Agreement a financial promotion exemption. The exemption the UK implementing legislation gives registered Swiss firms, article 73ZB of the Financial Promotion Order, does not extend to communications relating to collective investment schemes or alternative investment funds, as the FCA's guidance at PERG 8.14.40E records, and the general exemptions that might apply, for certified high net worth individuals or sophisticated investors for example, carry their own certification tests.

The branch, Part 4A and the exclusivity rule

A Swiss firm with a UK branch cannot mix the two access routes in the same activity. Section III paragraph A.c provides that, where the supplier is authorised in the United Kingdom under Part 4A of the Financial Services and Markets Act 2000, covered services notified under the Agreement, and the related activities covered by Section VIII paragraph A.1.d, cannot be carried on from, or under the supervision or control of, its permanent establishment in the United Kingdom. Section IV paragraph A.f adds that a covered supplier must not hold Part 4A authorisation for the service in respect of which it has notified.

The FCA and PRA guidelines translate this into the operational rule: a firm cannot register under the Agreement to provide a category of service, in relation to a category of financial instrument, to a category of client, where it already holds a Part 4A permission for the same three; if it wants the Agreement route, it must first vary or cancel the permission. Deference also does not extend to employees of a UK branch, although it does extend to employees of the Swiss entity present in the United Kingdom on a temporary basis where that presence does not amount to a permanent establishment.

None of this displaces the routes that existed before. As the FCA confirms on its BFSA page for firms, last updated on 20 January 2026, the overseas persons exclusion and UK authorisation remain available, and firms choose between access routes on an activity basis. For many Swiss houses the correct answer is a deliberate split: the Agreement for the cross-border private-client and wholesale book, the branch and its Part 4A permissions for everything the Agreement does not cover. That split has to be documented, because the register entry is public and an inconsistency between the register and the firm's actual activity is visible from outside.

What deference does not touch

The deference list in Section VIII paragraph A.1.b is broad on authorisation and specific on prudential measures, and it is not a general exemption. FINMA states the limiting principle plainly: deference does not apply to horizontal provisions, such as anti-money-laundering regulation. Conduct of business requirements are deferred to other than those relating to product intervention measures, and the implementing regulations expressly preserve the FCA's product intervention powers over registered Swiss suppliers. Obligations arising from trading on a UK trading venue are not relieved by Section VIII paragraph A.1.c.

The remaining conditions are set out in Section IX of Annex 5 and restated operationally in the FCA and PRA guidelines: annual reporting to the FCA through FINMA's platform is due by 30 April for the previous calendar year; the Agreement itself, at Section IX paragraph A.2, requires the number of covered clients by service and client category, total turnover, a breakdown per covered service (and, for dealing on own account, execution and reception and transmission of orders, by instrument) once turnover exceeds GBP 50,000,000 in each of two consecutive reporting periods, anonymised information on material complaints, and whether title transfer collateral arrangements were entered into. The supplementary content agreed between the FCA, the Bank of England (including in its capacity as the PRA) and FINMA for operational reasons, recorded at paragraph 2.15 of the guidelines, adds identifiers such as the firm's FINMA registration and BFSA register numbers.

Sub-custody outside the United Kingdom and Switzerland is permitted subject to due skill, care and diligence in selection and periodic review, documented grounds retained for five years after the sub-custodian ceases to be used, and segregation. And the UK authorities retain a host intervention power, exercisable after supervisory dialogue with FINMA, alongside the statutory power to impose prohibitions and restrictions and the wind-down machinery in the 2025 Regulations.

What a defensible classification file looks like

Bringing the above together, the file that withstands an information request from the FCA contains six things for every high net worth relationship. A net-asset computation that shows the Section VII exclusions applied, with a valuation date and a conversion basis where relevant. A capability assessment addressed to the correct person for the route relied on, and expressed in terms of the specific services and transactions contemplated. The standalone declarations, dated before the contract, mapped one to one against the covered services notified for that client category. The pre-contractual disclosure, with a record that it was given in good time and of the form in which it was given; the Agreement leaves the detailed wording and manner of that disclosure to be specified by the FCA after consulting FINMA (Section X paragraph A.5), and we are not aware of a Handbook specification to date. The regulator-disclosure consent, with a monitoring process for withdrawal and contractual consequences that follow it.

A re-papering trigger list completes the file: new covered service, new instrument category, change in the client's circumstances, change in the underlying natural person for a structure. The Agreement sets the status tests at the point of onboarding and does not, on the text available, impose an express periodic re-test, which is a reason to fix the review cycle in the contract.

Where a new covered service is added that the firm's register entry does not already cover for that instrument and client category, the firm must notify again through FINMA and wait for the FCA register entry to be updated before supplying it, so the documentation timetable and the registration timetable need to be planned together. Where the entry already covers the combination, only the client-level file needs to be brought up to date.

The Agreement is a precise instrument for a defined book: UK wholesale counterparties, and UK private wealth held either directly by individuals above a strictly computed threshold or through structures created for them. Firms that build the client-classification layer properly can serve that book from Zurich or Geneva without a UK authorisation and without a UK branch; a client test treated as an onboarding formality leaves unauthorised-business risk on a public register.

What this means for you

• Re-run your UK book against Annex 5; FinSA segmentation does not carry across. Swiss professional-client classification and BFSA covered-client status are different tests. Opted-up clients are not covered clients unless they qualify independently.
• Compute net assets the Agreement's way. Primary residence, most long-term insurance rights and pension entitlements come out. A client who is obviously wealthy can still fail, and the threshold is net assets in excess of GBP 2,000,000; a client at exactly that figure fails.
• Pick the right high net worth route before you paper it. The capability assessment and the signatures sit with different people in each of the three variants, and a file built on the wrong variant is defective even where the wealth is clear.
• Notify the prospecting activity. Communications to establish whether a UK person is a high net worth covered client are themselves a covered service. Register for it before the first approach that goes beyond a neutral status enquiry.
• Design the disclosure consent as a termination trigger. Withdrawal of consent means the firm may no longer serve the client. The contract should say what happens to mandates, positions and custody when it happens.
• Keep the six-part file for every high net worth relationship. The net-asset computation with its valuation date and conversion basis, the service-specific capability assessment addressed to the right person, the standalone declarations dated before the contract, the pre-contractual disclosure with a record of when and how it was given, the regulator-disclosure consent, and a re-papering trigger list for new services, new instruments and changes in the client's circumstances.

Isak Legal advises Swiss and UK financial institutions on cross-border market access, client classification and regulatory perimeter questions under the Berne Financial Services Agreement. See our Financial Regulation and United Kingdom pages, or get in touch.

This client update is provided for general information only, reflects the position as at 27 September 2026 and does not constitute legal advice or create a lawyer-client relationship. It addresses the Berne Financial Services Agreement and its United Kingdom implementing measures. The client and net-asset definitions are taken from Annex 5 Sections V to VII of the Agreement, and the operational conditions, including the verification, assessment, declaration, disclosure, consent, sub-custody and reporting requirements, from Annex 5 Sections IX and X, read in the Treaty Series text of the Agreement (Treaty Series No. 6 (2026), CP 1507). Where a point rests only on the supervisors' guidelines, the text says so. Client categorisation under UK domestic law is governed by the FCA Handbook as amended from time to time; the Agreement's own cross-references to UK law are subject to Article 44 (domestic law as in force at signature, unless otherwise specified). Verify the current texts, guidelines and register entries at the official sources linked above before acting. For advice on a specific matter, please contact us.