INTRODUCTION
A revised Investment Fund Statute came into force in Switzerland on 1 January 1995. The revised law contains more liberal provisions than the former one and is, in principle, compatible with EU law. Its purpose consists in investor protection which is pursued by means of transparency and information duties imposed on the bodies of the investment funds.
1. SWISS INVESTMENT FUNDS
1.1 Contractually structured, open-ended funds
The Investment Fund Statute deals first with Swiss Investment funds defined as funds domiciled and having their main administration in Switzerland. They must be structured as collective investment contracts.
Investment companies whose goal is investing their own assets are allowed under Swiss law and subject to the company law rather than to the Investment Fund Statute.
Swiss investment funds are required to be open-ended funds, i.e. an investor must be entitled to request the redemption of his shares from the investment fund at any time; only a few exemptions are made regarding funds investing in assets of reduced liquidity or real estate funds. Apart from these exemptions closed-ended Swiss investment funds do not qualify for authorisation.
1.2 Securities funds, real estate funds, other funds
The Investment Fund Statute provides for three types of Swiss investment funds:
- securities funds;
- real estate funds; and
- other funds (other than securities and real estate funds).
The regulations on securities funds are compatible with the EC Directive relating to undertakings for collective investment in transferable securities (UCITS) of 1985 (L375/3). Securities funds invest in securities that are listed on a stock exchange or are traded on another public market. There are detailed rules as to the allowed investments. Investments in derivatives on securities are possible up to certain limits of the assets of the fund provided, inter alia, (i) that the derivatives are traded on an exchange or another public market, (ii) that they serve efficient portfolio management purposes and (iii) that the potential liabilities are covered.
Apart from securities and real estate funds, so-called "other funds" may qualify for authorisation. They may also invest in investments of poor liquidity, high volatility or low risk-spread. Such a fund may focus inter alia on precious metals, commodities, units of other investment funds or techniques like options and futures. The law does not prevent funds from implementing an investment policy which leads to increased risks (as compared with traditional securities funds), provided that these risks are disclosed in the prospectus and solicitation materials as well as indicated in the name of the fund. In consequence, the new law allows funds such as "Tiger-Funds" and derivatives funds.
1.3 Organisation and authorisation
The fund management of a Swiss investment fund shall be carried out by a Swiss stock company having its registered office and main administration in Switzerland. It must not carry out business other than investment fund business. A bank as understood by the Swiss Federal Statute on Banks and Savings Banks shall act as custodian bank for the assets of the fund. Both the fund management and the custodian bank need an authorisation of the Swiss Federal Banking Commission for such an activity. They must be separate legal entities and their directors and managers must each be independent from the other.
The commercial offering or distribution of interests in investment funds by institutions other than the fund management, banks or insurance companies is also subject to an authorisation of the Swiss Federal Banking Commission.
1.4 Information Duties
By way of contrast to the former law, the fund management is required to publish a prospectus containing, inter alia, the regulations of the fund which are subject to the approval of the Federal Banking Commission. Moreover, it must publish audited annual reports, (non-audited) semi-annual reports and, at least twice a month, the issue and redemption prices of its interests. Swiss investment funds must be audited by special external auditors which are themselves subject to authorisation by the Swiss Federal Banking Commission.
2. IN-HOUSE COLLECTIVE INVESTMENT PORTFOLIOS
A special pool of assets to be held internally by banks ("bankinterne Sondervermoegen") is still permitted under the new law, however, it may be established only by banks for the benefit of customers and it must not be publicly solicited for. Apart from a few basic rules, in-house collective investment portfolios are not subject to the Investment Fund Statute.
3. FOREIGN INVESTMENT FUNDS
The Investment Fund Statute deals also with foreign investment funds. An investment fund is a foreign fund if its registered office and main administration are situated abroad.
3.1 Funds eligible for being marketed
The interest in a foreign investment fund may be commercially offered or distributed within or from the territory of Switzerland only upon prior authorisation of the Federal Banking Commission. Authorisation will be granted if the fund:
( is subject to adequate supervision by a public authority in the country where the registered office of the fund management or the corporation, respectively, is situated; and
( its organisation, as well as its investment policy, are equivalent in terms of investment protection as compared with the protection provided for by the Investment Fund Statute.
Consequently, no authorisation will be granted with regard to a foreign investment fund which is not adequately supervised in its home country. Only foreign investment funds which were structured in a manner similar to Swiss investment funds (contractual concept) qualified for authorisation prior to the enactment of the revised Investment Fund Statute. The revised law is more liberal in this respect: Now it is sufficient that the organisation and the investment policies of the fund are equivalent in terms of investment protection as compared with the protection provided for by the Swiss Investment Fund Statute. Therefore, both contractually structured funds (collective funds managed by a management company) and funds with a corporate structure whose sole object is the collective investment (investment companies such as SICAVs), provided that they are open-ended funds, are regarded as foreign investment funds that may qualify for being marketed within or from the territory of Switzerland.
3.2 Swiss representative
Interests in a foreign fund may be commercially offered or distributed only if a representative of the fund, domiciled in Switzerland, who needs a prior authorisation of the Federal Banking Commission was appointed.
Authorisation will be granted to an individual or legal entity domiciled in Switzerland (representative of the investment fund). By way of contrast to the former law, an authorisation may also be granted to institutions other than banks. The representative is responsible towards the investors and the Federal Banking Commission. It is - upon authorisation - entitled to offer and distribute interests in the fund within or from the territory of Switzerland.
4. STAMP DUTY
In connection with the revision of the Swiss investment fund law the stamp duty on the issue of interests in investment funds (issue stamp duty) was abolished as of 1 April 1993 whereas a transfer stamp duty may still be levied (depending on the parties involved).
The content of this article is intended to provide general information on the subject matter and is not a legal advice. An individual matter requires legal advice according to the specific circumstances.