The Federal Act on Financial Services (“FinSA”) as well as the Federal Act on Financial Institutions (“FinIA”), both dated June 15, 2018, come into force on January 1, 2020, with an implementation period of 24 months for most of the new requirements. General overview of the changes for funds/managers distributing/offering in Switzerland:
A. CISA RULES will generally continue to apply for 24 months or until the foreign fund managers respectively their appointed distributors for Switzerland can demonstrate that they comply with the new FinSA obligations (regarding information/transparency, documentation and reporting) as per FinSA Art.7 to 18; to the extent such obligations are applicable.
These obligations include:
- Clients’ segmentation,
- Organisational rules (FinIA),
- Rules of conduct on the Point of Sale (institutional clients are exempted),
Since there are currently no practical guidelines on how to implement new FinSA/FinIA rules, application of CISA rules should be continued for the time being.
B. MODIFICATION OF CURRENT CISA RULES and requirements for foreign funds offered in Switzerland to appoint a Swiss Representative (“SR”) and Paying Agent (“PA”) and ancillary requirements:
Subject to the fulfilment of the requirements detailed in the foregoing Section A, foreign funds will NO LONGER require a SR and a PA when offered to certain categories of Qualified Investors, in particular:
- Pension funds (public or private) with professional treasury operations (management)
- Family office type structures with professional treasury operations
- Authorized Independent Wealth Managers (such managers being considered as QI during the authorisation process, if they are members of an SRO)
Foreign Funds will STILL require a SR and a PA when offered to / or if the following types of investors are already invested in the relevant foreign fund:
- Non-Qualified-Investors (retail)
- High-Net-Worth-Individuals (HNWI) according to Article 5 paragraph 1 FinSA
- Family office type structures with no professional treasury operations
- Advisors of the above (unregulated)
- SR and PA are required for a foreign fund if banks and other regulated entities want to offer it to HNWI with whom they have not entered into an investment management agreement (discretionary or advisory).
Pursuant to the new article 127a CISO the advertisement for a foreign fund in Switzerland already triggers the duty to appoint a SR and PA if the advertisement is directed towards non-qualified investors or HNWI pursuant to Article 5 paragraph 1 FinSA.
Distribution agreement between the SR and the distributor under CISA will be abolished. Nevertheless, during the 24-month transition period or until the foreign funds’ managers respectively their appointed distributors for Switzerland confirm that they comply with FinSA obligations, foreign and/or Swiss distributors have to maintain the agreements they have entered into with a SR. Until that time, foreign funds still need to have a Swiss Representation and Paying Agent Agreement in place. For Swiss distributors under CISA, the change from CISA to FinSA/FinIA obligations must first be notified to the Swiss auditors with an official date of change, and afterwards to the SR/and to the investors.
Foreign fund managers / distributors of foreign funds – clarification on some specific requirements:
- Ombudsman Foreign fund managers/distributors of foreign funds will have to affiliate with a Swiss Ombudsman (mediation body) in order to offer the funds in Switzerland to institutional and professional clients. A six-month transition period will apply to get affiliated. If on January 1, 2020, the Swiss Department of Finance has not approved any Ombudsman, the six-month period will be postponed and starts only as of the date an Ombudsman has been approved.
- Client advisor register Investor advisors working for a prudentially supervised foreign financial service provider are exempt from the duty to register into a client advisor register as long as they offer funds in Switzerland to institutional and professional clients exclusively (including HNWI and their investment structures that wish to be considered as professional clients). There is no equivalence nor reciprocity test.
To the contrary, investor advisors working for a non-prudentially supervised foreign financial service provider will have to register to a client advisor register. A six-month transition period will apply to them to get affiliated. If on January 1, 2020, FINMA has not approved any client advisor register, the six-month period will be postponed and starts only as of the date a client advisor register has been approved.
Under the new Swiss regulation (FinSA/FinIA), employees of foreign financial service providers will be able to target retail investors in Switzerland but only if they are registered in the client advisor register.
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