Switzerland’s Revised Collective Investment Schemes Act: New Rules On Foreign Investment Fund Distribution, Asset Managers

Author:Mr Thomas Müller
Profession:Walder Wyss Ltd
 
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In March 2012, the Swiss Federal Council published a proposal to revise the Swiss Federal Act on Collective Investment Schemes (''CISA'') (see WSLR, May 2012, page 10). The main goal of the partial revision was to align the rules regarding the management, safekeeping, and distribution of collective investment schemes to international standards, in particular the EU Alternative Investment Fund Managers Directive (''AIFMD''). The proposal also aimed to strengthen investor protection and the competitiveness of the Swiss fund industry, and to ensure access of Swiss financial services providers to the EU market.

The Federal Council's proposal was heavily criticised by the fund industry for exceeding its intended purpose. Market participants argued that the proposed new provisions of the CISA were too strict compared to the requirements under the AIFMD and would negatively affect Switzerland as an asset management centre.

The Swiss parliament subsequently revised the original proposal. Both chambers of the Swiss parliament voted in September 2012 in favour of a leaner bill to revise the CISA, which nonetheless has notable implications for the distribution of foreign funds in Switzerland and the regulation of Swiss asset managers of such funds.

The revised law went into effect on March 1, 2013.

On the same date, the revised Ordinance on Collective Investment Schemes, which supplements the CISA, took effect.

It should be noted that revisions of the guidelines of the Swiss Financial Market Supervisory Authority (''FINMA'') which further define the distribution rules for fund interests are still pending. As of today, these guidelines (''FINMA Guidelines'') are only available in draft form. Therefore, this article is subject to the final FINMA Guidelines, which are expected to take force in the fourth quarter of 2013.

Distribution of Investment Fund Units or Shares

Previous Rules

Under the previous laws and regulations, public distribution or advertisement of Swiss or non-Swiss investment funds in or from Switzerland triggered authorisation and licensing requirements for both the funds and the Swiss distributor. Safe harbour rules were provided for private placements of foreign fund units. Under the previous private placement regime, no licence or authorisation was required if: 1) the solicitation targeted ''qualified investors'' as defined in the CISA; and 2) only marketing materials or activities that are typical for qualified investors were used. Under the previous law, financial institutions, companies with professional treasury operations and high-net-worth individuals (i.e., individuals with financial assets of at least CHF2 million (U.S.$2.1 million)) were considered qualified investors. The distribution of foreign fund units to such companies or individuals fell under the private placement regime without any requirements or restrictions applicable.

The Revised CISA

The revised CISA no longer uses the term ''public marketing''. In lieu thereof, the revised CISA introduces a comprehensive definition of the term ''distribution''. All marketing and distribution activities that fall within the scope of the new definition are now subject to regulatory requirements. All other activities (i.e., all activities which are not captured by the definition) continue to be regarded as private placements and are not subject to any regulation. With regard to distribution, the revised CISA differentiates between distribution to...

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