The Swiss government plans to amend the Swiss Federal Act on Collective Investment Schemes (Collective Investment Schemes Act, CISA). The revised CISA shall enter into force by mid 2012. Although the final text might undergo some amendments, the implications especially on the distribution of foreign collective investment schemes in Switzerland and the regulation of asset managers for foreign collective investment schemes in Switzerland will be fundamental. Switzerland has furthermore enacted and amended the Act and the Regulations on Corporate Pension Schemes (Bundesgesetz und Verordnung über die berufliche Alters-, Hinterlassenen- und Invalidenvorsorge; "BVG", "BVV1", "BVV2") which impose restrictions on Swiss and foreign asset managers for Swiss pension funds.
Planned Amendment of the Swiss Collective Investment Schemes Act, CISA
Under the old CISA, the marketing of foreign collective investment schemes to qualified investors in and from Switzerland was unregulated. This will change with the proposed revised CISA.
First, customers of Swiss asset managers will not be regarded as "qualified investors" any longer. Second, the marketing of any foreign collective investment scheme to customers in Switzerland, whether qualified or not, will be regulated. To this effect, the legal term "public advertising" will be replaced by the legal term "offering". Therefore, any offering in Switzerland will be regulated.
Foreign collective investment schemes shall not be allowed to be offered in Switzerland unless (a) an agreement between the Swiss Financial Market Supervisory Authority FINMA and the foreign supervisory authority on collaboration and exchange of information is in place and (b) a Swiss representative for the foreign collective investment scheme authorized by FINMA is appointed.
Everyone who distributes foreign collective investment schemes in or from Switzerland, whether to qualified investors or not, will need an authorization as a distributor from FINMA as of mid 2012.
The simplified prospectus will be replaced by a Key Investor Information Document (KID) similar to the KID under the UCITS Directive.
The relevant documents of foreign collective investment schemes to be marketed to nonqualified investors in Switzerland will need to be approved by FINMA.
Under the old CISA, Swiss asset managers of foreign collective investment schemes were virtually unregulated in Switzerland (apart from anti-money laundering regulation). They could apply for a licence by FINMA but were under no such obligation. As of mid 2012 (planned date for enactment), all Swiss asset managers of foreign collective investment schemes will need a FINMA licence. Existing managers will have to apply for a licence within one year. The delegation of investment decisions shall not be allowed other than to such asset managers who are under the supervision of an authority recognized by FINMA. Swiss custodian banks of collective investment schemes will need, besides the banking licence, the additional authorization as a custodian bank by FINMA. The delegation of custody functions by a custodian bank shall not be allowed save to adequately supervised third parties. The liability of custodian banks will be increased.
New Regulation of Swiss Pension Funds and of Asset Managers of Swiss Pension Funds Enacted as per August 1, 2011
The new Law ("BVG") and Regulations ("BVV1" and "BVV2") applicable to Swiss pension funds and asset managers of Swiss pension funds require a higher level of integrity and loyalty of all persons and companies involved in the management and asset management of Swiss pension funds. Their liability for damages has been increased.
The Swiss pension funds have a duty to perform a due diligence on the good standing, reputation and the professional experience of all internal and external asset managers by requesting certain documentation and information. Asset managers must strictly avoid conflicts of interest and must disclose certain economic interests and participations. Front, parallel and after running is strictly forbidden, and kick-backs and the like must be repaid to the pension fund according to mandatory law. Organisational measures to secure the new regulatory requirements need to be documented. Asset management agreements must be adapted to reflect all new legal provisions and must provide for Swiss jurisdiction to facilitate enforcement. Last but not least, foreign asset managers will not be eligible to Swiss pension funds any longer unless they are subject to adequate regulatory supervision and the standard of such supervision is recognized by FINMA.
Asset managers of Swiss pension funds are under the duty to adhere to the new provisions as of August 1, 2011. Swiss pension funds have a deadline until end of 2012 to adapt the agreements with asset managers. It is, however, likely that earlier adaption will be requested by larger pension funds.
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.
