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

Last Updated: 19 June 2013
Article by Thomas A. Müller

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 qualified investors only and distribution to non-qualified investors.

Private Placement

Under the revised CISA, a safe harbour rule for private placements remains in force. The provision of information and the distribution of fund units or shares by the Swiss or foreign distributor or the foreign fund to the following entities are not captured by the new definition of distribution and, therefore, are not regulated, and may be performed without any authorisation, approval or licence from FINMA:

  • to licensed financial institutions (banks, securities dealers, fund managers, asset managers of investment funds and central banks);
  • to regulated insurance institutions;
  • to any investor on an unsolicited basis, which, according to the relevant ordinance, is the case where an investor on his own initiative requests information, in particular in the context of long-term, non-gratuitous written advisory agreements or where an investor actively requests information or purchases/subscribes fund units without having been contacted or solicited prior to its request. If a third party, rather than the investment advisor, offers fund interests to either the investor or the investment advisor, then this exception to the distribution will not apply, according to the FINMA Guidelines; and
  • to any investor which has concluded a written discretionary asset management agreement with a FINMA licensed financial institution (i.e., bank) or a financial intermediary if information is provided via such financial institution or such independent asset manager. The financial intermediary must 1) in its capacity as financial intermediary, be regulated by anti-money laundering regulation; 2) be governed by the code of conduct employed by a specific self-regulatory body recognised by FINMA; and 3) comply with the recognised standards of the self-regulatory body. Again, if a third party, rather than the financial intermediary, offers fund interests to either the investor or the financial intermediary, then this exception to the distribution will not apply, according to the FINMA Guidelines.

The publication of prices, indexes, net asset values and tax information by a regulated financial institution are also covered by the revised private placement rules.

Distribution to Qualified Investors Only

However, all marketing of fund interests outside the private placement regime is now subject to the newly implemented regulations. The revised CISA differentiates between distribution to qualified investors only and distribution to non-qualified investors. Whereas, for distribution to non-qualified investors, the requirements of the old ''public marketing'' must be met, less stringent rules apply if fund interests are exclusively distributed to qualified investors.

Under the revised CISA, ''qualified investors'' are defined as follows:

  • public entities and retirement benefits institutions with professional treasury operations;
  • corporates with professional treasury operations; and
  • high-net-worth individuals who declare themselves to be qualified (opting in). It is required that such high-net- worth individual either 1) owns assets in an amount exceeding CHF5 million (U.S.$5.4 million) or 2) owns banking assets of CHF500,000 (U.S.$537,937) and additionally has sufficient understanding of the risks of the respective investment based on personal education or professional experience.

Strictly speaking, licensed financial institutions, regulated insurance institutions and investors which have concluded a written discretionary asset management agreement also are qualified investors. But since they fall under the private placement regime, they are not discussed in this section.

Foreign collective investment schemes that are distributed only to qualified investors do not need authorisation from FINMA, but, as a new rule, they have to appoint a Swiss representative and a Swiss paying agent for the distribution of the units or shares in Switzerland. The Swiss representative shall serve as a point of contact for Swiss investors and must obtain a licence from FINMA. As the Swiss paying agent, a bank under the Swiss Banking Act must be appointed. Neither the Swiss representative nor the Swiss paying agent may terminate its mandate without the prior consent of FINMA.

The foreign investment fund must authorise the Swiss representative to fully represent the fund with respect to Swiss investors and FINMA and provide it with all necessary information needed to fulfil its duties. The foreign investment fund's documents must refer to the Swiss representative and the Swiss paying agent and provide for the jurisdiction of Swiss courts. The documents must also disclose all fees as well as account for remuneration and advantages. Furthermore, the collective investment scheme's designation may not provide cause for confusion or deception.

Foreign investment funds which shall be distributed exclusively to qualified investors may be distributed only by a financial intermediary that is adequately supervised in Switzerland or in its home jurisdiction. This provision will allow a fund management company licensed as an alternative investment fund manager under the EU AIFMD in an EU member state to distribute the interests of an offshore fund to qualified investors in Switzerland (provided that its license from the home regulator allows for fund distribution).

As a new rule, however, a distributor of a foreign investment fund needs to sign a distribution agreement with the Swiss representative of each fund it distributes. The agreement must be governed by Swiss law, and the distributor must therein undertake to exclusively use fund documents which refer to the Swiss representative and the Swiss paying agent and provide for the jurisdiction of Swiss courts.

Distribution to Non-Qualified Investors

Distribution to non-qualified investors under the revised CISA corresponds to the old ''public marketing''. The foreign fund requires the prior approval of FINMA and it has to appoint a Swiss representative and a Swiss paying agent (e.g., a Swiss bank). The representative has to represent the fund with regard to investors and the FINMA. It further observes all statutory obligations to report, publish and inform FINMA and the investors according to the Swiss regulations and the code of conduct of the industry organisation (in particular of the Swiss Funds Association). The representative's name and address must be disclosed in every publication of the fund.

A foreign fund is generally granted authorisation for distribution in Switzerland, provided that:

  • the fund or the fund management company, the asset manager and the depository bank are subject to adequate supervision by an applicable foreign regulator;
  • the fund or the fund management company and the depository bank are subject to regulation considered adequate relative to Swiss regulation;
  • the designation collective investment scheme does not provide cause for confusion or deception;
  • a representative and a paying agent are appointed for the distribution of the units in Switzerland; and
  • FINMA has concluded a cooperation agreement with the applicable foreign regulator.

Regulation of Asset Managers

Under the previous law, asset managers of funds administrated outside Switzerland did not require a licence from FINMA. However, such asset managers could apply for a licence if the home country of the fund required the asset manager to be licensed. This provision enabled Swiss financial services providers to manage undertakings for collective investment in transferable securities (''UCITS'') under the EU UCITS Directives 2001/ 107/EC and 2001/108/EC.

The CISA revision changes this licensing and supervision scheme from voluntary to mandatory. In general, asset managers of foreign investment funds now have to obtain a licence from FINMA. In order to obtain the licence, the asset manager must, inter alia, demonstrate equity capital of at least CHF200,000 (U.S.$215,175) and sufficient personnel.

The new rules also allow a foreign asset manager to establish a licensed branch in Switzerland. This possibility aims to strengthen Switzerland as a centre for asset management. It is noteworthy that the possibility to open a licensed branch in Switzerland will most likely be limited to a foreign asset manager but not be permitted to a foreign management company.

The revised CISA includes some exceptions regarding the duty to obtain a licence. For instance, asset managers of funds limited to qualified investors are excluded from the licensing requirement, provided that 1) the assets under management (including assets acquired through the use of leverage) do not exceed CHF100 million (U.S.$107.6 million); or 2) the assets are below CHF500 million (U.S.$537.9 million) (provided that the managed portfolio is not leveraged and that investors do not have redemption rights exercisable for a period of five years following the date of the initial investment); or 3) all investors belong to the same financial group as the asset managers. These provisions should be in line with the de minimis rule introduced by the EU AIFMD, under which voluntary licensing by the asset manager remains possible. In addition, FINMA may partially or completely exempt asset managers of foreign funds from provisions of the revised CISA upon request, in certain justified cases.

The Swiss asset manager may delegate its services to a foreign entity, provided that a cooperation agreement between FINMA and the foreign entity's regulator is in place (if such cooperation agreement is required by the foreign jurisdiction, e.g., the EU AIFMD).

Transitional Rules

By March 1, 2015, every foreign investment fund distributed to qualified investors in Switzerland must have appointed a Swiss representative and a Swiss paying agent and comply with all regulations corresponding to such representative. Foreign investment funds further have to ensure within the same period of time that their designation does not give cause for confusion or deception.

Distributors of foreign investment funds which have not yet been subject to the CISA have to contact and register with FINMA within six months after the entry into force of the revised CISA (i.e., before September 1, 2013) and apply for a FINMA licence within two years (i.e., before March 1, 2015), if not sufficiently licensed in their home country. Furthermore, distributors must sign a distribution agreement with the Swiss representative of each foreign investment fund they distribute by March 1, 2015.

The distribution of fund interests within the revised limited private placement regime set forth above is not subject to regulation, and respective distributors are not affected by this reform.

Generally, the transitional rules apply to Swiss asset managers of foreign investment funds. Asset managers of foreign investment funds which have not yet been subject to the CISA have to contact and register with FINMA within six months after the entry into force of the revised CISA (i.e., before September 1, 2013) and apply for a FINMA licence within two years (i.e., before March 1, 2015).

Trends and Outlook

The new provisions of the CISA only recently entered into force, with the goal of preserving the quality and competitiveness of Swiss asset management services. We certainly welcome the Swiss parliament's passage of a reform bill that should not overly burden the Swiss asset management industry.

However, it is hard to understand why stricter rules on private placement have been implemented in Switzerland, while national private placement rules of the EU member states will potentially be phased out in 2018 under the EU AIFMD.

Previous revisions of Swiss regulations on collective investment funds have not brought about the hoped-for positive results, but instead have had a negative impact on the Swiss investment fund market. It is difficult to say whether the revised CISA will meet expectations this time.

First, the new rules lack provisions concerning the remuneration of asset managers, which is required under the EU AIFMD. Whether Swiss alternative investment fund managers will thus be able to benefit from a pan-EU passport with regard to their marketing and management activities from 2015 on remains unclear.

Second, there is concern that the duty to appoint a Swiss representative and a Swiss paying agent for the distribution of funds to high-net-worth individuals and institutional investors will mainly have a negative effect on the cost side without achieving additional true investor protections. These new rules are clearly burdensome on the distribution of foreign fund interests in Switzerland.

Originally published in Bloomberg BNA: World Securities Law Report.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Baer & Karrer
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Baer & Karrer
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions