Legal ease: Swiss fund liberalisation

Changes are taking place in the Swiss industry with respect to how fund managers can distribute funds, as Eversheds Sutherland lawyers Ludovic Duarte and Dr Tigran Serobyan explain.

The Swiss financial markets regulatory framework is continuously being optimised and simplified, in observance of well-established international standards of financial market regulation. Notable measures include the introduction of a so-called “regulatory sandbox” for financial institutions in 2017 and the introduction of a new banking licence for fintech companies in 2019.

The beginning of 2020 was marked by two major bills. The Swiss Federal Act on Financial Services (which aims to improve investor protection in line with European requirements) and the Swiss Federal Act on Financial Institutions (setting out different categories of financial institutions and the regulatory requirements applicable to them, such as the introduction of a licensing requirement for asset managers and trustees) adopted in 2018 were enacted on January 1, 2020. 

In parallel, these reforms have brought about further changes in other financial market laws, in particular the Federal Act on Collective Investment Schemes (more frequently known as investment funds, mutual funds or simply “funds”). 

If prior to these amendments the distribution of funds in Switzerland required a licence from the Swiss regulator, this is no longer the case since. It should be further noted that the term “distribution” was defined rather broadly in the Act to cover any offering or marketing (with certain carve-outs, such as reverse solicitation). Notwithstanding the abolition of the licensing requirement for the distribution of funds, distributors should however be mindful of certain regulatory requirements that still remain in effect and apply. 

In particular, these would include the requirement to obtain approval from the Swiss regulator before offering foreign collective investment schemes to non-qualified investors in Switzerland (as opposed to professional, institutional, or high-net-worth (HNW) retail clients  who request to be treated as professional clients). It applies also to Swiss and foreign funds and their management companies, not already deemed institutional clients, who may request to be treated as such. 

Besides, the distribution of foreign funds to HNW clients treated as professional clients further requires the appointment of a local representative authorised by the Swiss regulator and a Swiss payment agent (a bank in Switzerland), unless within the scope of a permanent investment advice relationship.

Last but not least, the legislator adopted an amendment of the Federal Act on Collective Investment Schemes in December 2021, which contemplates the introduction of a new fund vehicle, the “limited qualified investor fund”. 

Such funds will be reserved exclusively for qualified investors and will not be offered to the general public. In return, they will not require a licence or an approval from the Swiss regulator and could be launched more quickly and cost-effectively. The draft of the amendment is pending an optional referendum and the amendment is expected to enter into effect in 2023. There are grounds to believe more reforms can be expected.

Ludovic Duarte (pictured above, left) is a partner and head of private clients, and Dr Tigran Serobyan is a senior associate, LL.M, at Eversheds Sutherland Ltd in Switzerland

© 2022 funds europe

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