The foreign alternative investment fund (AIF) business (including all non-Swiss domiciled funds) in Switzerland is mainly governed by:
- the Financial Services Act (FinSA);
- the Financial Institutions Act (FinIA);
- the Collective Investment Schemes Act (CISA); and
- their associated ordinances.
FinSA, FinIA and CISA are framework laws that leave many matters to be regulated in detail by the associated ordinances. In addition, the Swiss Financial Market Supervisory Authority (FINMA) has published several circulars addressing specific areas of collective investment schemes; and market participants must also comply with Swiss self-regulations (ie, standards defined by the Swiss Funds and Asset Management Association (SFAMA) or by the Swiss Bankers Association and recognised by FINMA as minimum standards).
The Swiss regulatory regime distinguishes between open-ended and closed-ended collective investment schemes. The main differences between open-ended and closed-ended collective investment schemes concern:
- the rules on the redemption of shares/units of collective investment schemes;
- the legal structures; and
- the licensing requirements, depending on what types of investor are targeted in Switzerland with respect to foreign AIFs.
The offering and advertising of foreign AIFs to retail clients require prior authorisation from FINMA, which includes the appointment of a Swiss representative and a Swiss paying agent. By contrast, the offering and advertising of foreign AIFs to institutional clients or professional clients in general do not trigger an obligation to appoint a Swiss representative/Swiss paying agent or to register such foreign AIF with FINMA. An exemption applies if foreign AIFs are targeting Swiss high-net-worth individuals and private investment structures created for them without professional treasury operations(including structures such as trusts, family offices and domiciliary companies) through an opt-out declaration. In such cases, foreign AIFs must appoint a Swiss representative and Swiss paying agent in Switzerland, but need not register with FINMA.
In general, the new Swiss regulations, which entered into force on 1 January 2020, govern the offering and advertising of foreign AIFs in Switzerland (subject to certain exceptions due to the application of transitional provisions until 31 December 2022). Furthermore, the new regulations comprehensively regulate for the first time the cross-border provision of financial services by non-Swiss financial service providers to clients in Switzerland, as well as the production of financial instruments for the Swiss market by non-Swiss producers.
Yes. By way of example, FINMA and the Securities and Futures Commission of Hong Kong (SFC) have entered into a cooperation agreement which came into force on 2 December 2016, and promotes cooperation between the two authorities and reciprocal market access for the respective fund providers. In signing this agreement, FINMA and Hong Kong’s SFC recognise the supervisory regimes for asset managers of collective investment schemes and securities funds in Switzerland and Hong Kong as fundamentally equivalent. This creates a framework within which authorised Swiss asset managers can manage collective investment schemes marketed to retail clients in Hong Kong, while fund managers in Hong Kong are granted reciprocal rights in Switzerland.
The foreign AIF business in Switzerland is mainly supervised by FINMA, as the competent regulatory body and supervisory authority. Investor protection, transparency and market effectiveness are also assured by Swiss self-regulations (eg, market participant standards defined by SFAMA or the Swiss Bankers Association recognised by FINMA as minimum standards), by the Swiss representatives and by the Swiss paying agents. In particular, a Swiss representative must:
- be authorised by the FINMA and provide access to the Swiss market;
- provide for a place of performance and jurisdiction;
- ensure compliance with Swiss regulations;
- coordinate all communications and notifications from FINMA; and
- provide a point of contact for Swiss investors (eg, which provides fund documents and deals with investor complaints).
Furthermore, a Swiss paying agent must be a Swiss bank authorised by FINMA and grant Swiss investors the opportunity to subscribe or redeem shares/units through the Swiss paying agent.
FINMA is in regular contact with other regulators and has entered into cooperation agreements with its counterparts in other jurisdictions (see also question 1.4).
Most foreign collective investment schemes approved for offering and advertising to retail clients in Switzerland are undertakings for collective investment in transferable securities (UCITS) which are domiciled in Luxembourg or Ireland. Non-UCITS funds aimed at institutional clients or professional clients are mainly domiciled in the Cayman Islands or Delaware in the form of limited partnerships for collective investments (LPs), trusts, exempted companies or public limited companies domiciled in Ireland, as well as Luxembourg special limited partnerships (société en commandite spéciale (SCSp)).
See question 2.1.
In general, non-UCITS funds for institutional clients or professional clients need not be registered with the Swiss Financial Market Supervisory Authority (FINMA) (ie, no FINMA registration and supervision costs); whereas UCITS for retail clients must be registered with FINMA (ie, FINMA registration and supervision costs).
See question 2.1.
Closed-ended funds are typically structured in the form of an LP or SCSp; whereas open-ended funds are structured in different forms, such as exempted companies, public limited companies or special purpose companies.
No such requirements exist for foreign alternative investment funds(AIFs) in Switzerland; but the appointment of a Swiss representative is required by operation of law to offer and advertise foreign AIFs in Switzerland to certain groups of investors (eg, retail investors and high-net-worth individuals).
No, but the appointment of a Swiss paying agent is required by operation of law to offer and advertise foreign AIFs in Switzerland to certain groups of investors (eg, high-net-worth individuals). A Swiss paying agent must be a Swiss bank authorised by FINMA and grants Swiss investors the opportunity to subscribe or redeem shares/units through the Swiss paying agent.
There is neither a general regulatory system nor any general FINMA guidance on the redomiciliation of foreign AIFs to Switzerland. FINMA may, in individual cases, accept forms of repatriation of foreign AIFs to Switzerland.
With respect to foreign alternative investment funds (AIFs), the licensing requirements depend on the types of investors that are targeted in Switzerland. The offering and advertising of foreign AIFs to retail clients require prior authorisation from the Swiss Financial Market Supervisory Authority (FINMA), which includes the appointment of a Swiss representative and a Swiss paying agent. By contrast, the offering and advertising of foreign AIFs to institutional clients or professional clients do not trigger an obligation to register with FINMA. If foreign AIFs are targeting Swiss high-net-worth individuals and private investment structures created for them without professional treasury operations(including structures such as trusts, family offices and domiciliary companies)with an opt-out declaration, they must appoint a Swiss representative and a Swiss paying agent in Switzerland.
Most foreign collective investment schemes approved for offering and advertising in Switzerland are undertakings for collective investment in transferable securities (UCITS). FINMA has standardised the approval process for UCITS in recent years. The application must be filed by the Swiss representative, together with the relevant fund documents for Switzerland.
As FINMA practice requires that a non-UCITS fund meet equivalent criteria to those which apply to Swiss AIFs, there have been very few registrations of non-UCITS funds recently (eg, Hong Kong-based funds, due to the cooperation agreement between FINMA and the Hong Kong Securities and Futures Commission). Other existing AIFs are grandfathered. In order to obtain authorisation, the following criteria must be met:
- A Swiss representative and a Swiss paying agent must be appointed;
- The designation of the foreign collective investment scheme must not give reason for deception or confusion;
- FINMA and the foreign supervisory authority must have entered into an agreement on the cooperation and exchange of information regarding the distribution of the AIF;
- The regulatory framework governing the organisation, investor rights and investment policy of the fund management company or fund company, as well as of the custodian, must be equivalent to the provisions of the Collective Investment Schemes Act; and
- The collective investment scheme, the fund management company or fund company, the asset manager and the custodian must be subject to public supervision intended to protect investors.
With regard to the process for obtaining authorisation for AIFs see questions 3.1 and 3.2. In general, the whole set-up and FINMA registration process takes approximately four to eight weeks (mainly depending on the turnaround times of FINMA and the AIF).
With regard to foreign AIFs offered and advertised to Swiss high-net-worth individuals and private investment structures created for them without professional treasury operations(including structures such as trusts, family offices and domiciliary companies)with an opt-out declaration, the whole set-up process takes approximately two to three weeks (depending mainly on the AIF’s turnaround time for commenting on drafted agreements).
Typically, Swiss alternative investment fund managers (AIFMs) and advisers are incorporated as a corporation within the meaning of Articles 620 and following of the Swiss Code of Obligations. According to the Financial Institutions Act (FinIA), a Swiss-based manager must have the legal form of a commercial enterprise. Foreign asset managers of AIFs may open a branch in Switzerland (subject to certain additional requirements).
The advantages and disadvantages of the different types of structures may vary and will depend on:
- the complexity and scope of the AIFM;
- the applicable investment strategies; and
- the organisation of the AIFM.
Anyone that manages a collective investment scheme on a commercial basis must be authorised by the Swiss Financial Market Supervisory Authority (FINMA). If a foreign manager of collective assets employs staff in Switzerland who permanently manage collective investment schemes in or from Switzerland on a professional basis, it must obtain prior authorisation from FINMA before establishing a branch (subject to certain de minimis exemptions according to FinIA).
An AIFM must meet the following requirements, among others:
- It must have the legal form of a commercial enterprise;
- It must have an organisation that is appropriate to its role;
- It must have the required equity capital and financial guarantees;
- The articles of association, partnership agreement or organisational rules must include a factually and geographically accurate description of its proposed operations; and
- It must manage at least one collective investment scheme.
The formation of a Swiss AIFM is subject to authorisation by FINMA. In addition to an extensive application that must be filed with FINMA, a FINMA recognised audit firm must be appointed to review the application in the case of the authorisation of a Swiss investment fund manager. The audit firm that performs this entry audit may not be the AIF’s or the AIFM’s regular auditor. The duration of the authorisation process may vary and will depend, among other things, on:
- the complexity and scope of the application;
- the applicable investment strategies; and
- the organisation of the applicant.
No answer submitted for this question.
There are no legislative restrictions on the transfer of investors’ interests in open-ended AIFs (subject to restrictions provided by the fund’s regulations). However, the regulations of open-ended AIFs may restrict the issue and transfer of interests. In respect of closed-ended retails funds, investors have neither a direct nor an indirect legal claim to request redemptions.
No answer submitted for this question.
No answer submitted for this question.
No answer submitted for this question.
The marketing of foreign alternative investment funds (AIFs) to retail clients requires prior authorisation from the Swiss Financial Market Supervisory Authority (FINMA), which includes the appointment of a Swiss representative and a Swiss paying agent. By contrast, the offering and advertising of foreign AIFs to institutional clients or professional clients does not trigger an obligation to register with FINMA. If foreign AIFs are targeted at Swiss high-net-worth individuals and private investment structures created for them without professional treasury operations(including structures such as trusts, family offices and domiciliary companies)with an opt-out declaration, then the foreign AIF must appoint a Swiss representative and Swiss paying agent in Switzerland.
In addition to the marketing, the Financial Services Act (FinSA) foresees a new concept of financial services, which includes the acquisition and disposal of funds, among other things. This includes any activity targeted directly at Swiss investors with the specific aim of acquiring or disposing of a fund (eg, including activities such as road shows). A financial service will trigger a new duty to register the client adviser of the financial service provider in a Swiss client adviser register. However, it is envisaged that client advisers of FINMA-supervised financial service providers or client advisers of foreign financial service providers (prudentially supervised by their home financial market authority and providing financial services exclusively for professional or institutional clients) will be exempt from this duty. Nevertheless, irrespective of whether registration in a client adviser register is required by law, all financial service providers must ensure compliance with the rules of conduct and organisation set out under FinSA, and affiliate with an ombudsman’s office where an activity qualifies as a financial service.
See questions 3.2 and 5.1. Additionally, the requirements to be met for client advisers of financial service providers include:
- sufficient knowledge of FinSA rules of conduct;
- the necessary specialist knowledge (training and further education);
- the obtainment of professional liability insurance (the minimum amount insured must be at least equivalent to CHF 500,000 per client adviser); and
- affiliation with an ombudsman office in Switzerland.
See question 3.3. To date, the Swiss Federal Department of Finance has not yet approved an ombudsman. The Swiss fund industry expects that this should happen in the first quarter of 2020. The ombudsman office is responsible for defining the affiliation conditions (no further details are currently available). Furthermore, to date, FINMA has not yet approved a register of advisers. The Swiss fund industry expects this should happen in the first half of 2020. The register of advisers will be responsible for defining the registration conditions (no further details are currently available).
Foreign AIFs with FINMA authorisation can be marketed to all types of Swiss investors. Foreign AIFs which have appointed a Swiss representative and Swiss paying agent can be marketed to all types of professional and institutional clients (although targeting of retail clients is not permitted). Finally, foreign AIFs which have neither obtained FINMA authorisation nor appointed a Swiss representative and Swiss paying agent can be marketed to professional and institutional clients only (eg, it is not possible to target high-net-worth individuals with an opt-out declaration).
Apart from the criteria mentioned in questions 3.1., 3.2 and 5.1, the marketing materials of foreign AIFs (subject to fund documents such as the prospectus or annual reports) must be designated as advertising materials and must include an appropriate Swiss disclaimer. In respect of the marketing materials of foreign AIFs registered with FINMA, the Swiss disclaimer includes, among other things:
- information on the place of incorporation of the AIF;
- the place where the respective fund documents can be obtained free of charge (at least from the Swiss representative); and
- the names of the appointed Swiss representative and the Swiss paying agent.
Furthermore, the publication of performance data in such marketing materials must comply with the specific requirements stated in the guidelines on the calculation and publication of performance data of collective investment schemes of the Swiss Funds and Asset Management Association.
With regard to the marketing materials of foreign AIFs which have appointed a Swiss representative and Swiss paying agent only, the Swiss disclaimer includes, among other things:
- the place where the respective fund documents can be obtained free of charge (at least from the Swiss representative);
- the place of performance and jurisdiction; and
- the names of the appointed Swiss representative and the Swiss paying agent.
See question 5.5.
See question 5.1.
No, cross-border activities are allowed, provided that the foreign marketing entities meet the Swiss requirements (as far as applicable in relation to client advisers, affiliation with a Swiss ombudsman’s office and/or registration in a Swiss client adviser register).
See questions 3.1, 3.2 and, where marketing activities qualify as a financial service, 5.1.
In the case of foreign alternative investment funds (AIFs), there are no additional Swiss legislative restrictions (apart from the restrictions of the AIF’s jurisdiction of domicile).
In the case of foreign AIFs, there are no additional Swiss legal or regulatory requirements (apart from specific legal or regulatory requirements of the fund’s jurisdiction of domicile).
No answer submitted for this question.
No answer submitted for this question.
No answer submitted for this question.
No answer submitted for this question.
No answer submitted for this question.
No answer submitted for this question.
No answer submitted for this question.
No answer submitted for this question.
No answer submitted for this question.
In general, the new Swiss regulations, which entered into force on 1 January 2020, aim to ensure compliance with the Markets in Financial Instruments Directive (2014/65/EU) (MiFID II). In several areas, however, the new legislation is not identical to MIFID II. Furthermore, the new Swiss regulations aim, among other things:
- to enhance market structures and market transparency;
- to create uniform competitive conditions; and
- to increase customer protection by imposing new rules of conduct on financial service providers.
The focus is on information and enquiry obligations. In a nutshell, the alternative investment fund (AIF) landscape in Switzerland is significantly influenced by prevailing regulatory trends in Europe.
The new Financial Services Act, the new the Financial Institutions Act and the revised Collective Investment Schemes Act and their associated ordinances now regulate the marketing activities of foreign collective investment schemes in Switzerland as of 1 January 2020 (subject to certain exceptions due to the application of transitional provisions until 31 December 2022). Monitoring at the point of sale is also newly regulated. At present, however, it is not yet clear what requirements will apply with regard to registration in the register of client advisers, affiliation with the ombudsman’s office and compliance with the rules of conduct at the point of sale. It is expected that more information regarding the register of client advisers and the ombudsman’s office will be made available in Q1/Q2 2020; and that the Swiss fund industry minimum standards of the Swiss Funds and Asset Management Association and the directives of the Swiss Financial Market Supervisory Authority will be updated in the course of 2020.
Due to the prevailing market situation, it is currently difficult to make forecasts in this regard. Nevertheless, it seems that an outstanding bond strategy may attract particular interest in Switzerland.
In general, the potential target group of Swiss investors should be identified by the foreign alternative investment fund (AIF) or its manager before entering the Swiss market. Depending on the fund structure, the respective foreign collective investment scheme can be registered with the Swiss Financial Market Supervisory Authority and thereafter be marketed to all types of Swiss investors; or can be marketed to certain groups of investors only. Further, foreign AIFs and their managers should analyse the sales force to determine whether cross-border activities can be conducted and/or local marketing entities should be appointed (depending on the sales force, its authorisation in its country of domicile, its network in Switzerland and its disposable capital).
Finally, to facilitate market access to Switzerland, foreign AIFs or their managers may contact a Swiss representative and/or Swiss legal counsel to ensure a smooth entry into the Swiss fund market.
