SWITZERLAND

Fund management

1 How is fund management regulated in your jurisdiction? Which authorities have primary responsibility for regulating funds, fund managers and those marketing funds?

The primary legal basis for the investment fund business in Switzerland is the Federal Act on Collective Investment Schemes of 23 June 2006 (the Collective Investment Schemes Act (CISA)), which came into force on 1 January 2007 and underwent a major revision in 2013. The Swiss Financial Market Supervisory Authority (FINMA) authorises or approves, as the case may be, and supervises funds, fund management companies and persons involved in marketing funds.

CISA focuses on providing the basic principles and regulations pertaining to investment fund business. Its implementing ordinances – the Ordinance of the Swiss Federal Council on Collective Investment Schemes (CISO) as well as the Ordinance of the Swiss Financial Market Supervisory Authority (CISO-FINMA) – provide more detailed regulations. FINMA has issued various circulars setting out in more detail the duties of the licensees under the CISA.

In terms of self-regulation, the Swiss Funds and Asset Management Association (SFAMA) has issued a code of conduct for the Swiss fund business as well as various model documents and guidelines, some of which have been recognised by FINMA as a minimum standard that must be respected by all supervised entities.

The purpose of CISA and its implementing ordinances is to protect investors and to ensure transparency and the proper functioning of the market for collective investment schemes in Switzerland. All of these regulations regulate both open-ended and closed-ended, retail and non-retail as well as local and foreign investment funds. However, while Swiss investment funds are always subject to an authorisation or approval requirement, foreign investment funds only require approval if they are distributed to retail investors in or from Switzerland.

Generally, the following Swiss investment fund-related entities are required to obtain a licence from FINMA:

  • fund management companies;
  • investment companies with variable capital (SICAVs);
  • limited partnerships for collective investment schemes;
  • investment companies with fixed capital (SICAFs);
  • custodian banks of Swiss collective investment schemes;
  • asset managers of collective investment schemes;
  • distributors; and
  • representatives of foreign collective investment schemes.

Certain asset managers of collective investment schemes, distributors and representatives who already hold another FINMA licence may be exempt from obtaining such a further licence.

2 Is fund administration regulated in your jurisdiction?

Fund administration as such, as opposed to fund management and asset management, is not subject to a licence requirement in Switzerland. However, it is regulated and supervised either as part of the oversight over fund management, within a fund management company (for contractual investment funds), a self-managed SICAV, limited partnership for collective investment schemes or a SICAF. Similarly, the delegation of fund administration functions to a fund administrator or other providers is regulated. In particular, the fund management company may only delegate fund administration tasks, if it is in the interest of efficient management. Further, the fund management company may only appoint persons who are properly qualified to carry out the relevant tasks. The fund management company must ensure the proper instruction, monitoring and control required for the implementation of the assigned tasks.

3 What is the authorisation or licensing process for funds? What are the key requirements that apply to managers and operators of investment funds in your jurisdiction?

The approval process for investment funds depends on whether the investment fund is organised under Swiss law or a foreign law. Furthermore, the applicable regulations also differ depending on how the fund is organised.

Swiss investment funds

Open-ended funds

Pursuant to CISA, there are two different investment vehicles available to structure an open-ended collective investment scheme (see also question 12), namely, a contractual investment fund (contractual fund) or a SICAV. In the case of contractual funds, the fund management company and the custodian bank must be authorised as such by FINMA (see question 1). Further, the fund management company must submit the fund contract, with the consent of the custodian bank, to FINMA for approval.

In the case of a SICAV, it must have obtained authorisation from FINMA (see question 1). As part of this process, its articles of association and investment regulations are subject to FINMA approval. The SICAV must also appoint a custodian bank. FINMA may, however, grant exemption from this duty in certain cases.

Closed-ended funds

Pursuant to CISA, closed-ended collective investment schemes can either be structured as a limited partnership for collective investment schemes or a SICAF (see questions 12 and 23).

Both the limited partnership for collective investment schemes and the SICAF must have obtained the relevant licence from FINMA (see question 1). In particular, the limited partnership agreement of the limited partnership for collective investment schemes and the articles of association and investment regulations of the SICAF are submitted to FINMA for approval.

In Switzerland an applicant requiring a licence from FINMA under CISA (see question 1), such as a fund management company or fund, must comply with the following requirements:

  • the persons responsible for its management and business operations must have a good reputation, guarantee proper management and possess the requisite specialist qualifications;
  • the significant equity holders must have a good reputation and their influence must not be used to the detriment of cautious and sound business practice;
  • compliance with the duties under CISA is ensured by internal regulations and an appropriate organisational structure;
  • sufficient financial guarantees are available; and
  • the additional authorisation requirements listed in the relevant provisions of CISA pertaining to the relevant licensee are met.

Foreign investment funds

See question 39.

4 What is the territorial scope of fund regulation? Can an overseas manager perform management activities or provide services to clients in your jurisdiction without authorisation?

The territorial scope of Swiss fund regulation is basically limited to the following:

  • all collective investment schemes established or distributed in Switzerland;
  • all persons responsible for the (general) fund management or asset management of (Swiss or foreign) collective investment schemes who are based in Switzerland;
  • all Swiss banks that hold the assets of collective investment schemes in safe custody; and
  • all persons who distribute collective investment schemes in or from Switzerland.

A foreign fund management company cannot, as such, act as a fund management company of a Swiss collective investment scheme. A Swiss fund management company may, however, delegate certain fund administration activities to third parties. They may also delegate asset management to foreign asset managers who are subject to recognised supervision under certain circumstances. In particular, where foreign law requires an agreement on cooperation and the exchange of information with foreign supervisory authorities, it may only delegate investment decisions to asset managers abroad where such an agreement exists between FINMA and the relevant foreign supervisory authorities for the investment decisions concerned.

5 Is the acquisition of a controlling or non-controlling stake in a fund manager in your jurisdiction subject to prior authorisation by the regulator?

Significant changes regarding the fund management company, such as a change in its significant equity holders need to be approved by FINMA in order for the fund management company to maintain its licence.

6 Are there any regulatory restrictions on the structuring of the fund manager's compensation and profit-sharing arrangements?

Generally, only the following may be charged from the assets of a Swiss collective investment scheme:

  • a management fee for remunerating the activities of the fund management company;
  • custody fees and other costs for remuneration of the custodian bank's activity, including the costs for the safekeeping of the fund's assets by third-party custodians or collective securities depositories;
  • a portfolio management fee and any performance fees for the remuneration of the portfolio manager of collective investment schemes;
  • " a distribution fee to remunerate the activity of distributors; " certain incidental costs; and
  • commissions and fees incurred in connection with the issue and redemption of units.

In addition to this, fund management companies must disclose the intended use of the management fee. This means that investors should be given a detailed picture of the use made of the management fees paid out of the assets of the fund before they purchase units. This disclosure duty also applies to profit-sharing arrangements, if any exist.

The SFAMA Guidelines on Duties regarding the Charging and Use of Fees and Costs set out the relevant requirements in more detail.

FUND MARKETING

7 Does the marketing of investment funds in your jurisdiction require authorisation?

Whoever markets, or more generally, distributes, investment funds in or from Switzerland requires an authorisation either in Switzerland or in their home country. Furthermore, depending on the category of the targeted investors, an approval requirement of the investment fund itself by FINMA may also be triggered. 'Distribution' covers all forms of marketing and advertising, subject to certain specific exemptions (see question 8).

Any individual or company marketing (ie, distributing) Swiss investment funds to non-qualified investors (as opposed to qualified investors as defined in question 27) must obtain a distributor's licence from FINMA. Furthermore, distributors of foreign investment funds in Switzerland must also hold a FINMA distributor's licence, whether the foreign investment fund is distributed to non-qualified investors or to qualified investors (as defined in question 27). Individuals and legal entities as well as partnerships can apply for a FINMA distributor's licence. However, branch offices of foreign entities cannot obtain a licence as a distributor.

Any party licensed by FINMA as a bank, securities trader, insurance or fund management company, asset manager of investment funds or Swiss representative of foreign investment funds pursuant to the CISA, is exempted from the obligation to also obtain a FINMA distributor's licence. Certain agents of insurance companies are also excluded from the scope of the licence obligation for distributors of collective investment schemes.

8 What marketing activities require authorisation?

Generally, any form of offering or advertising pertaining to investment funds (including the mere mention of a particular investment fund), which is intended to interest investors in acquiring the relevant investment fund, is, in principle, deemed to be 'distribution', unless such advertising is exclusively addressed to regulated financial intermediaries (such as banks, securities dealers, fund management companies and asset managers of investment funds), central banks or regulated insurance companies.

Offering and advertising of investment funds exclusively to regulated financial intermediaries as described above must not be accessible to any other category of investor (qualified or non-qualified investors as defined in question 27).

The following activities are not deemed to be distribution and therefore do not require a distributor's licence or, as the case may be, an approval of the investment fund by FINMA:

  • the provision of information and the subscription of investment funds at the instigation of (reverse solicitation), or at the own initiative of, investors (eg, in the context of certain defined types of investment advisory agreements or for execution-only transactions);
  • the provision of information and the subscription of investment funds based on a written discretionary management agreement with regulated financial intermediaries (such as banks, securities dealers, fund management companies and asset managers of investment funds) and central banks;
  • the provision of information and the subscription of investment funds based on a written discretionary management agreement with an independent asset manager complying with minimal standards with respect to (Swiss) anti-money laundering regulations, conduct rules and the form and content of the agreement;
  • the publication of prices, net asset values and tax data by regulated financial intermediaries, unless contact information is provided; and
  • the offering of stock option schemes in the form of collective investment schemes to employees.

9 What is the territorial scope of your regulation? May an overseas entity perform fund marketing activities in your jurisdiction without authorisation?

The territorial scope of the rules on distribution of investment funds includes the distribution in and from Switzerland as well as distribution into Switzerland from abroad. Regarding the relevant authorisations for Swiss distributors, see question 7.

In addition, a foreign financial intermediary may distribute foreign investment schemes (exclusively to qualified investors in Switzerland) without obtaining a distributor's licence from FINMA provided it holds a licence in its home jurisdiction allowing the distribution of investment funds in its country of domicile and has entered into a written distribution agreement with a Swiss representative in Switzerland subject to Swiss law.

10 If a local entity must be involved in the fund marketing process, how is this rule satisfied in practice?

Before distributing foreign collective investment schemes in or from Switzerland, the fund management company or the fund must contractually appoint a Swiss representative and a Swiss paying agent.

The Swiss representative must then appoint the entity wishing to market the investment fund as a distributor by way of a written distribution agreement to which Swiss law is applicable. Such distribution agreement must commit the distributor to exclusively use fund documents that indicate the names of the Swiss representative and paying agent as well as the place of jurisdiction.

For the marketing of Swiss funds, no distribution licence is required except for marketing to retail investors.

11 What restrictions are there on intermediaries earning commission payments in relation to their marketing activities in your jurisdiction?

As a matter of principle, Swiss law does not restrict intermediaries involved in marketing funds in or from Switzerland from earning commission payments. Institutions paying such distribution fees must ensure that the remuneration system promotes proper client advice and the fostering of long-term relationships. Furthermore, distributors and other intermediaries involved in marketing activities are required to disclose the nature and scale of all fees and other pecuniary benefits through which the activities of the distributor are to be compensated. Finally, the Swiss Supreme Court held in two leading cases that, as a matter of principle, a portfolio manager who receives distribution fees is required to pass them over to the client, unless all of the following requirements are met:

  • the client waives its right to receive the distribution fee and other benefits (ie, the client agreed that the distributor will retain the benefits it receives from third parties in the course of the contractual course of business on behalf of the client);
  • the client is in a position to estimate the overall amount of the distribution fee in question, which is possible only if the distributor disclosed to the client the amount of the fee actually paid or, at least, the range of the fees and how they were calculated; and
  • the distributor discloses the risk of conflicts of interest and the measures taken to avoid any adverse consequence for the client.

Under pension fund laws and regulations, an occupational pension institution is not allowed to agree to such a waiver, thus effectively banning the use of distribution fees when directly dealing with Swiss pension institutions.

The subject of distribution fees was revisited in connection with the law review process related to the Financial Services Act (FinSA) (which is pending in Parliament and expected to enter into force mid2018). Although previously there were discussions on partially banning the payment of commissions for marketing activities or prohibiting financial service providers from calling themselves 'independent' if they received fees, the version currently pending in Parliament does not provide for a ban on distribution fees and allows financial service providers to accept and keep fees provided the above-mentioned requirements are met, thus codifying the precedents of the Swiss Supreme Court.

Retail funds

12 What are the main legal vehicles used to set up a retail fund? How are they formed?

Retail funds can either be structured as open-ended or closed-ended investment funds. Open-ended retail funds can take the form of a contractual fund or a SICAV. Contractual funds are based on a tripartite collective investment agreement (fund contract) between the investor, the fund management company and the custodian bank. The majority of open-ended retail funds in Switzerland are set up as contractual funds. SICAVs are investment companies with variable capital that are, to a large extent, subject to the provisions of the Code of Obligations on companies limited by shares with the following characteristics:

  • the share capital and number of shares vary;
  • the share capital is divided into company and investor shares;
  • for whose liabilities only the company's assets are liable; and
  • the sole purpose is collective capital investment.

Unless the law and the articles of association of the SICAV provide otherwise, a SICAV may, at any time, issue new shares and must, at all times, if requested, redeem shares at the net asset value.

Both company and investor shares, in principle, have the same rights and obligations and each share, regardless of its category, carries one vote. Nevertheless, only the holders of the company shares may decide on the SICAV's dissolution.

Closed-ended retail funds can take the form of a SICAF of a listed Swiss company limited by shares.

A SICAF is an investment company with fixed capital that is set up as a company limited by shares pursuant to the Code of Obligations with the following characteristics:

  • " the sole purpose of the company is the investment of collective capital;
  • the shareholders are not required to be qualified shareholders in terms of the CISA (see question 27); and
  • the company is not listed on a Swiss stock exchange.

To date, no SICAFs have yet been approved by FINMA. In practice, the promoters will prefer to list the company (or exclude its accessibility to retail investors), because investment companies limited by shares are out of the scope of the CISA and can therefore remain unregulated.

13 What are the key laws and other sets of rules that govern retail funds?

See question 1.

Swiss investment funds

Swiss investment funds are subject to authorisation or approval requirements to be established and marketed. This is true whether the investment fund is open or closed-ended or whether it is a retail or a non-retail fund (see question 1).

Open-ended retail funds

In the case of a contractual fund, the fund management company must be authorised by FINMA and the fund contract must be approved by FINMA.

SICAVs must also be authorised by FINMA who must also approve their articles of association and investment regulations.

A simplified approval procedure may be adopted for open-ended investment funds to the extent that the fund regulations:

  • comply with a format that FINMA has recognised as a minimum standard, such as model regulations and prospectus of a specific industry body; or
  • comply with a set of standards that FINMA has recognised as binding in relation to the relevant licensee.

Closed-ended retail funds

Like the SICAV, the SICAF itself must be authorised by FINMA who must also approve the articles of association and investment regulations.

Foreign investment funds

Prior to distributing foreign investment funds in or from Switzerland to non-qualified investors, FINMA must have approved the binding documents such as the prospectus, articles of association and fund contract. Furthermore, the foreign fund needs to appoint a representative and a paying agent in Switzerland, irrespective of whether it targets nonqualified or qualified investors.

15 Who can market retail funds? To whom can they be marketed?

As regards the question of who can market retail funds, see question 7. There are no restrictions on the type of investor to whom retail funds can be marketed.

16 Are there any special requirements that apply to managers or operators of retail funds?

There are no special requirements that apply to managers or operators of Swiss retail funds. See question 3 regarding the general requirements that apply to managers and operators of investment funds.

17 What are the investment and borrowing restrictions on retail funds?

There are no generally applicable restrictions on investment and borrowing for Swiss retail funds. However, different investment and borrowing restrictions apply pursuant to the CISA and its implementing ordinances, depending on whether the investment fund qualifies as a securities fund, a real estate fund, another fund for traditional investments or another fund for alternative investments. Further restrictions may apply based on the fund contract or the articles of association.

Securities funds

Securities funds are generally allowed to invest in transferable securities issued on a large scale and in non-securitised rights having the same function (uncertified securities) that are traded on a stock exchange or another regulated marked that is open to the public and other liquid financial assets. Apart from investing in such assets, securities funds may also, subject to applicable restrictions:

  • engage in securities lending;
  • enter into repurchase agreements and reverse repurchase agreements;
  • borrow, on a temporary basis, up to 10 per cent of the fund's net assets;
  • pledge or transfer as collateral up to 25 per cent of the fund's net assets; and
  • use derivatives.

Real estate funds

Real estate funds may, in particular, invest in the following:

  • real estate;
  • real estate companies;
  • units in real estate funds; and
  • foreign real estate assets.

Furthermore, real estate funds are, under certain circumstances, allowed to enter into derivative transactions.

Other funds for traditional investments

Other funds for traditional investments are, in particular, permitted to invest in the following:

  • securities;
  • units in collective investment schemes;
  • precious metals; and
  • various derivatives instruments.

In addition, they may use the following investment techniques:

  • borrow amounts of up to 25 per cent of the fund's net assets;
  • pledge, or transfer as collateral, up to 60 per cent of the fund's net assets;
  • commit to an overall exposure of up to 225 per cent of the fund's net assets; and
  • engage in short-selling.

Other funds for alternative investments

While the permitted investments are basically the same as for other funds for traditional investments, less restrictive regulations apply regarding investment techniques. Other funds for alternative investments are permitted to:

  • borrow amounts of up to 50 per cent of the fund's net assets;
  • pledge, or transfer as collateral, up to 100 per cent of the fund's net assets;
  • commit to an overall exposure of up to 600 per cent of the fund's net assets; and
  • engage in short-selling.

FINMA may in individual cases grant other funds for traditional and alternative investments an exemption from the rules pertaining to the following:

  • the permitted investments;
  • the investment techniques;
  • the restrictions; and
  • the risk diversification.

18 What is the tax treatment of retail funds? Are exemptions available?

In principle, Swiss tax laws do not discriminate between retail and non-retail investment funds. The taxation of Swiss investment funds depends on the way the funds are legally structured under the CISA.

Swiss contractual funds, SICAVs and limited partnerships for collective investments are treated as transparent for the purpose of income or profit taxation as long as they do not directly own real estate. As a result, the investors, as opposed to the funds, are directly and exclusively subject to taxation, typically in the country of their tax residence. Nevertheless, such fund structures are subject to Swiss withholding tax on net profits, excluding capital gains, if they are accumulating funds and on the effective distributions in the case of distributing funds. The 35 per cent withholding tax that is levied on distributions of profits or on the accumulated profits, or both, can be reclaimed by Swiss residents and foreign investors in accordance with the applicable double taxation treaty between Switzerland and the country of the foreign investor's residence.

SICAFs are not transparent from a tax perspective. The SICAF is treated as a separate taxpayer in Switzerland and is subject to ordinary corporate income tax. Dividend payments from the SICAF to its shareholders are subject to Swiss withholding tax at the rate of 35 per cent.

For Swiss individual and corporate income tax purposes, the legislation does not distinguish between investments in Swiss or foreign investment funds. In both cases, distributed and reinvested fund income received is subject to income tax for Swiss investors while capital gains are tax-free for investors holding their assets for private investment purposes. The taxable income and the tax value of foreign funds for net wealth tax purposes are published every calendar year on the website of the Swiss Federal Tax Authorities.

However, only Swiss funds are subject to Swiss withholding taxes (anticipatory taxes) at a rate of 35 per cent on the net profits with respect to the effective distributions. A foreign fund may be recharacterised as a Swiss fund for Swiss withholding tax purposes if the members of the board are mainly Swiss residents and the board meetings are held in Switzerland or the supervisory functions of the custodian bank are carried out by a Swiss person.

19 Must the portfolio of assets of a retail fund be held by a separate local custodian? What regulations are in place to protect the fund's assets?

Assets of a Swiss open-ended fund (whether in the form of a contractual fund or a SICAV) must be held with a custodian bank, regardless of whether the respective investment fund targets retail or non-retail investors.

The custodian bank must hold a banking licence from FINMA in accordance with the Federal Act on Banking and Savings Institutions of 8 November 1934, which must also be licensed as a custodian bank by FINMA. The custodian bank is responsible for the safekeeping of the assets of the investment fund and issuing and redeeming units, as well as making payments on behalf of the investment fund. Furthermore, the custodian bank must ensure that the fund management company or the SICAV complies with applicable investment fund regulations. Accordingly, the custodian bank is, in particular, responsible for verifying the calculation of the net asset value and the issue and redemption prices of the units and ensuring that investment decisions comply with the applicable investment regulations. It must also assess whether profits are allocated in accordance with the fund regulations.

In the event of bankruptcy of the custodian bank, the assets of the investment funds are not included in the estate, but are segregated in favour of the investors, subject to any claims the custodian bank may have against the investors. As regards contractual funds, the fund management company acts as a fiduciary with regard to the investors' assets. Therefore, in the case of bankruptcy of the fund management company, the proceedings are similar to those in the case of bankruptcy of the custodian bank. The assets are segregated from the assets of the bankrupt estate. As regards closed-ended funds, SICAFs are also required to hold their assets with a custodian bank. By contrast, no such obligation exists for limited partnerships for collective investment.

20 What are the main governance requirements for a retail fund formed in your jurisdiction?

With regard to the entities connected to any form of investment fund, including retail funds, FINMA only grants the relevant licence if, in particular, the following is true:

  • the persons responsible for the management and business operations have a good reputation, guarantee proper management and possess the requisite specialist qualifications;
  • the significant equity holders have a good reputation and do not exert their influence to the detriment of prudent and sound business practice;
  • compliance with the duties resulting from CISA is ensured by internal regulations and an appropriate organisational structure; and
  • sufficient financial guarantees are available.

Suchrequirementsmustbefulfilledatalltimesfollowingthegrantingof the licence (see also question 3). Should a change in the circumstances underlying FINMA's licence approval arise, FINMA's authorisation must be sought prior to the continuation of activity.

Further, licensees (see question 1) and their agents generally need to fulfil the following requirements:

  • duty of loyalty: they must act independently and exclusively in the interest of the investors;
  • " due diligence: they must implement the organisational measures that are necessary for ensuring proper management; and " duty to provide information, as follows:
  • they must ensure the provision of transparent financial statements and provide appropriate information pertaining to the investment funds they manage and distribute as well as to the assets they hold in safekeeping;
  • " they are required to disclose all charges and fees incurred directly or indirectly by the investors and their appropriation; and
  • they are required to notify investors of compensation, brokerage fees and other soft commissions in a full, truthful and comprehensible manner. CISA also provides for a record-keeping duty, pursuant to which the licensees (see question 1) are responsible for ensuring that all of their distribution and solicitation activities, as well as those of their agents, are recorded in written form.

21 What are the periodic reporting requirements for retail funds?

Swiss investment funds

Within four months of the close of the financial year, open-ended collective investment schemes need to publish an annual report, regardless of whether they target non-qualified or qualified investors. Furthermore, a semi-annual report has to be issued within two months of the end of the first half of the financial year.

The issue and redemption price must be published in the print media or electronic platforms set out in the prospectus (see below) each time units are issued and redeemed.

Further, FINMA must be notified of any changes regarding the following:

  • persons responsible for management and business operations;
  • significant equity holders;
  • executive persons entrusted with the performance of the custodian bank's duties;
  • financial guarantees, especially if the fund no longer complies with the minimum requirements; and
  • the prospectus or the key investor information document, articles of association and the fund contract.

Should these changes result in a change of the relevant circumstances with regard to obtaining an authorisation as a collective investment scheme in the first place, FINMA has to authorise said changes and a simple notification is not sufficient (see question 20).

Further, a notification to FINMA is necessary regarding facts that might have a negative impact on the good reputation of significant equity holders or the proper management and sound business practice by persons in charge within the funds, and, in particular, any criminal proceedings against them.

Foreign investment funds

The Swiss representative of a foreign investment fund for retail investors also has certain notification duties to FINMA regarding the following:

  • any measures taken by a foreign supervisory authority against the foreign fund, in particular a withdrawal of its authorisation;
  • any amendments to the relevant documents of the foreign fund (such as prospectus, key investor information document) and the articles of association, the fund contract or similar documents required in accordance with the applicable domestic law; and
  • the (proposed) termination of representative agreements.

All notifications to the investors of both Swiss and foreign investment funds in Switzerland are carried out by way of publication in a Swiss official language in the Swiss Official Gazette of Commerce, in a print media as defined in the prospectus, or on a publicly accessible electronic platform approved by FINMA.

22 Can the manager or operator place any restrictions on the issue, transfer and redemption of interests in retail funds? Restrictions on the issue and transfer

Investment funds may only be available to investors that fulfil certain defined objective criteria provided for in the fund documents.

As regards contractual funds, transfer restrictions can be specified in the fund contract. There are, however, no statutory provisions restricting the transfer of shares. Shares in SICAVs are generally freely transferable.

The transferability of shares in a SICAF is governed by the provisions of the Code of Obligations and the SICAF's articles of association can set out certain transfer restrictions. If there are no such restrictions, the shares are freely transferable and the SICAF's board of directors generally needs to approve the transfer, unless the SICAF offers the seller of the shares to take over its shares at the real value at the time of the request for its own account, the account of other shareholders or third parties, and the acquirer does not expressly declare that it has acquired the shares in its own name and for its own account.

Redemption restrictions

In the case of open-ended funds, a redemption can generally be requested at any time by the investor. However, the rules of a specific fund can provide that a redemption is only possible on specific dates, if the following criteria are fulfilled:

  • the investments are difficult to value or are of limited marketability;
  • redemptions can be requested at least four times per year; and
  • the restricted right of redemption is explicitly disclosed in the regulations and prospectus.

Furthermore, FINMA can, upon request, authorise further restrictions, especially if the investment fund invests in the following:

  • assets that are neither listed nor traded on a regulated market open to the public;
  • mortgage investments; and
  • private equity investments.

Generally, redemption right restrictions must be disclosed in the relevant investment fund regulations and the prospectus. The redemption right cannot be suspended for more than five years.

In the following exceptional circumstances, redemptions can be restricted if the investment fund's regulations contain relevant provisions:

  • a market that serves as the basis for the valuation of a significant proportion of the investment fund's assets is closed, or trading on the market is restricted or suspended;
  • " in the event of emergencies (political, economic, military or monetary);
  • owing to exchange controls or restrictions on other asset transfers, the collective investment scheme can no longer transact its business; and
  • large withdrawals of units or shares may significantly endanger the interests of other investors.

If redemptions are deferred because of these exceptional circumstances, the investment fund immediately has to inform the auditor, FINMA, as well as its investors.

In the case of closed-ended funds, the redemption of shares cannot be requested.

Non-retail pooled funds

23 What are the main legal vehicles used to set up a non-retail fund? How are they formed?

Open-ended non-retail funds

Open-ended non-retail funds can be structured as contractual funds and SICAVs, which are both limited to qualified investors (as regards their particularities, see question 12).

Closed-ended non-retail funds

Closed-ended non-retail funds can be structured as a limited partnership for collective investment schemes or a SICAF (as regards the particularities of a SICAF, see question 12).

A limited partnership for collective investment schemes is a limited partnership with the sole object of collective investment. At least one member bears unlimited liability (the general partner), while the other members (limited partners) are liable only up to a specified amount (the limited partner's contribution).

Further, general partners must be companies limited by shares with their registered office in Switzerland. Limited partners must be qualified investors under CISA (see question 27).

Limited partnerships for collective investment schemes are specifically used for investment in risk capital (venture capital), real estate projects and other alternative investments.

24 What are the key laws and other sets of rules that govern nonretail funds?

See question 1.

25 Must non-retail funds be authorised or licensed to be established or marketed in your jurisdiction?

See questions 1 and 14. As regards limited partnerships for collective investment schemes, FINMA must have authorised the partnership and approved such with regard to the partnership agreement.

26 Who can market non-retail funds? To whom can they be marketed?

Marketing a foreign fund in Switzerland, including non-retail funds to qualified investors, requires a FINMA distributor licence (see questions 7 and 9 – the latter also covers foreign distributors into Switzerland).

27 Do investor-protection rules restrict ownership in non-retail funds to certain classes of investor?

Non-retail funds may only be distributed to qualified investors. The following are deemed to be 'qualified investors' pursuant to CISA:

  • regulated financial intermediaries, such as banks, securities dealers, fund management companies and asset managers of collective investment schemes, central banks and regulated insurance companies;
  • public entities and pension funds with professional treasurers;
  • enterprises with professional treasurers;
  • investors who have entered into a discretionary asset management agreement with a regulated financial intermediary (as described above) or with an independent asset manager complying with certain minimal standards, unless they have declared in writing that they do not want to be considered as qualified (opt-out); and
  • high net worth individuals to the extent that they fulfil certain criteria (thresholds of assets or knowledge in the field of investments) and have requested in writing to be treated as qualified investors (opt-in).

Pursuant to the FINMA Circular 2013/09 on the distribution of collective investment schemes, independent asset managers complying with certain minimal standards as set out above may also be treated as if they were qualified investors.

28 Are there any special requirements that apply to managers or operators of non-retail funds?

There are no specific requirements that apply to managers or operators of non-retail funds, compared with retail funds (see question 16).

29 What is the tax treatment of non-retail funds? Are any exemptions available?

The tax treatment of non-retail funds is the same as the tax treatment of retail funds (see question 18).

30 Must the portfolio of assets of a non-retail fund be held by a separate local custodian? What regulations are in place to protect the fund's assets?

The same rules and regulations apply as to retail funds (see question 19).

31 What are the main governance requirements for a non-retail fund formed in your jurisdiction?

See question 20.

32 What are the periodic reporting requirements for non-retail funds?

With regard to Swiss non-retail funds, the same rules and regulations apply as to retail funds (see question 21).

As regards foreign non-retail funds, there are no requirements for reporting to FINMA.

Separately managed accounts

33 How are separately managed accounts typically structured in your jurisdiction?

Separately managed accounts are generally offered to institutional clients and wealthy private clients. In such a set-up, the asset manager (bank or independent asset manager) manages the assets of the client, which are deposited in an account in the name of the client, in accordance with the terms set out in a written discretionary management agreement.

Separately managed accounts are not, as such, subject to the provisions on collective investment schemes. Rather, general contract law, in particular the provisions of article 394 et seq of the Code of Obligations regarding agency contracts, are applicable between the client and the asset manager.

34 What are the key legal issues to be determined when structuring a separately managed account?

According to the provisions of the Code of Obligations regarding agency contracts, which also apply to separately managed accounts, the agent is obliged to return to the client anything received for whatever reason as result of its agency activities (article 400 of the Code of Obligations). This also applies to retrocession payments, provided that the asset manager receives a commission from the issuer of a product for placing it with the client, a client waiver is generally necessary in order for the agent to legitimately hold back such commission and to not be obliged to pass it on to the client.

Further, the Swiss Bankers Association and the Swiss Fund and Asset Management Association, as well as other professional associations, have issued guidelines regarding asset management. Such guidelines are considered by the courts and FINMA to be a generally accepted standard of conduct as regards asset management contracts. They clarify the scope of the general duty of care of the asset manager and oblige managers to manage the client's assets in good faith, diligently and in accordance with the agreed investment goals and guidelines of the client. Beyond this, the asset manager has to take the personal circumstances of the client into account and act in accordance with the initial instructions from the client, as the owner of the assets.

35 Is the management or marketing of separately managed accounts regulated in your jurisdiction?

To date, the management or marketing of separately managed accounts in Switzerland is not regulated in Switzerland. The activity is, however, often carried out by a bank that requires a FINMA licence in that capacity. Nevertheless, independent asset managers are not currently obliged to obtain a licence or an authorisation from FINMA.

Independent asset managers do, however, qualify as financial intermediaries and are therefore subject to the Federal Act on Combating Money Laundering and Terrorist Financing in the Financial Sector. Consequently, independent asset managers (as a matter of law, banks are subject to anti-money laundering rules) must become a member of a recognised self-regulatory organisation with respect to anti-money laundering supervision or request a relevant anti-money laundering licence from FINMA to carry out their business.

As far as managed fund accounts are concerned, the rules on distribution of collective investment schemes apply indirectly (see question 7 et seq).

General

36 Are there proposals for further regulation of funds, fund managers or marketers of funds in your jurisdiction?

Switzerland is currently undertaking a far-reaching reform of its financial markets regulations.

The main goal of this reform is to consolidate the Swiss financial markets regulation into the following three main acts:

  • the Financial Market Infrastructure Act, which was adopted by Parliament in June 2015 and entered into force on 1 January 2016 together with its implementing Financial Market Infrastructure Ordinance;
  • FinSA: in November 2015, the Swiss Federal Council adopted the dispatch on FinSA, including a draft of FinSA. The draft is now being debated in Parliament and it is expected that it may enter into force as early as mid-2018; and
  • the Financial Institutions Act (FinIA): the status and the timeline for enacting FinIA is the same as for FinSA.

37 Outline any specific requirements for stock-exchange listing of retail and non-retail funds.

The listing rules of the main Swiss stock market, the SIX Swiss Exchange (the Listing Rules) contain special requirements with regard to the listing of 'ordinary' collective investment schemes. In particular, collective investment schemes must comply with special requirements concerning minimum capitalisation (ie, assets of at least 100 million Swiss francs at the time of listing) and free float of units. These requirements are waived, to the extent that a SIX Swiss Exchange participant undertakes to act as market maker for the securities in question (article 108, paragraph 2 of the Listing Rules). Furthermore, these requirements do not apply to exchange-traded funds.

In any event, the listing of units in collective investment schemes is conditional on an authorisation from FINMA for domestic collective investment schemes and an approval for distribution in or from Switzerland for foreign collective investment schemes (article 109 of the Listing Rules). Both domestic and foreign investment schemes are obliged to publish a listing prospectus, which in essence corresponds to the latest version of the prospectus authorised by FINMA, including additional listing information (article 110 of the Listing Rules). With regard to real estate funds and exchange-traded funds, the SIX Swiss Exchange has issued specific implementing trading provisions (article 106 of the Listing Rules).

Pursuant to CISA, investment companies in the form of Swiss companies limited by shares are not governed by CISA, provided that they are listed on a Swiss exchange, or provided that only qualified investors (see question 27) are entitled to hold interests in them and that their shares are registered (article 2, paragraph 3 of CISA). Swiss investment companies and real estate companies organised as a company limited by shares can therefore be listed on the SIX Swiss Exchange without being licensed or approved by FINMA. However, in such a case, they must comply with the specific disclosure requirements applicable to investment companies.

38 Is it possible to redomicile an overseas vehicle in your jurisdiction?

Theoretically, it is possible to redomicile an overseas collective investment scheme in Switzerland. However, in doing so, the overseas collective investment scheme will need to be transformed into a Swiss collective investment scheme. Therefore, it would need to be restructured either as a contractual fund or a SICAV (in the case of an open-ended collective investment scheme), a SICAF or a limited partnership for collective capital investments (in the case of a closed-ended collective investment scheme) complying with all applicable Swiss laws and regulations.

39 Are there any special rules relating to the ability of foreign investors to invest in funds established or managed in your jurisdiction or domestic investors to invest in funds established or managed abroad?

There are no general legal limitations on the admissibility of foreign investors to invest in domestically established or managed funds. However, foreign investors must meet the specific requirements set out in CISA pertaining to qualified investors (see question 27), to be able to invest in Swiss investment funds for qualified investors.

There are no Swiss rules that would generally prevent a Swiss investor from investing in foreign-established or managed funds. Regarding the admissibility to distribute foreign funds in or from Switzerland, see question 14.

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.