The Swiss fund market is the fourth largest in Europe with a 7.2 % market share and a total volume of 1,088.8 billion Swiss francs (€966 billion). As Switzerland is not part of the EU, it is not subject to AIFMD rules. The distribution of foreign funds is regulated by the Collective Investment Schemes Act (Cisa). Under the Cisa, Swiss investors are segmented into qualified (regulated and unregulated) and non-qualified investors.
Foreign funds distributed to unregulated qualified and non-qualified investors require a Swiss representative and paying agent. Authorisation from the Swiss Financial Market Authority is required when distributing to non-qualified investors.
The Swiss Financial Services Act (FinSA) and the Swiss Financial Institutions Act (FinIA) are expected to enter into force in 2020. They were drafted as a response to the 2009 financial crisis and with the purpose of meeting international standards, most importantly the recognition of the equivalence under the ‘third-country rules’ under MiFID II.
The FinSA introduces two client categories, amending the current ones; professional and private clients. Professional investors under FinSA will be considered qualified investors.
Private investors, with financial assets exceeding 500,000 Swiss francs with sufficient knowledge of investment risk may ‘opt out’ and be considered as professional clients.
The fund industry will also be affected by FinSA/FinIA, as the current licensing requirement under Art.19(1bis) Cisa and Art.30a Collective Investment Schemes Ordinance (Ciso) for distributors will be abolished. Distributors and other financial advisers will need to be accepted and maintain updated information in a register for investment advisers that will be managed by licensed companies.
With regard to prospectus requirements, the FinSA will introduce a uniform set of rules pertaining to any securities offered publicly. The content and approval of the prospectus are inspired by the EU Prospectus Regulation. An ex-ante approval of prospectuses will be mandatory. In addition to the prospectus and in line with the EU regulation on packaged retail investment and insurance products, the publication of a key investor information document is compulsory if a financial instrument is offered to private clients.
Once a fund promoter decides to approach the Swiss market, more specifically to non-qualified or private investors, the first step is generally to appoint a Swiss representative who will explain Swiss regulation and aspects specific to the fund.
A list of Swiss paying agents will be provided for the client to choose from. An onboarding process follows, during which the representative executes due diligence work on the fund, a representation contract is established, and the fund’s legal and marketing documents are amended for distribution in Switzerland. Consequently documents are filed with Finma.
Ucits and Hong Kong mutual funds have a fast-track approval for distribution to private clients. Finma has cooperation and information exchange agreements with the supervisory authorities of 17 countries. Funds domiciled in one of these are also eligible to apply for public distribution and access to the big distribution platforms, including those from established banks. This enables access to a broad scope of potential investors.
Lisa Weihser is a compliance officer at Oligo Swiss Fund Services
©2019 funds europe