The AMAS recently published a revised version of its self-regulation, which is the result of the revision of the Swiss Collective Investment Schemes Act ("CISA") triggered by the Swiss Financial Services Act ("FinSA") and the Swiss Financial Institutions Act ("FinIA"). This revised AMAS self-regulation is of particular practical importance, due to the recognition by the Swiss Financial Market Supervisory Authority ("FINMA") of several documents as setting a minimum standard to which all market participants have to adhere.
Introduction
Prior to 2020, the CISA contained rules of conduct and organisation requirements, to be complied with at the so-called "point of sale". Since January 1, 2020, FinSA governs such rules of conduct and organisation requirements exclusively.
As a result of the reorganisation of the Swiss financial markets regulations, the role of the CISA is now limited to regulating collective investment schemes as products at the exclusion of the provision of financial services. In this context, the AMAS self-regulation aims to specify the product-specific rules of conduct (as opposed to those at the point of sale) and to provide market participants with templates for Swiss collective investment schemes.
Therefore, AMAS initiated a process for the revision of its entire self-regulation, in particular its Code of Conduct, Guidelines for real estate funds, certain technical guidelines, and the model fund distribution agreement. In addition, AMAS has published revised templates for the documentation of Swiss funds, namely for Swiss securities funds (which are the Swiss equivalent to EU UCITS) and Swiss real estate funds. The templates include not only the fund regulations but also the prospectus of each of these two funds categories.
In this context, it is important to stress that Swiss law distinguishes between two categories of self-regulation: (i) the so-called "autonomous self-regulation", which applies to market participants on purely voluntary basis, and (ii) the officially recognized FINMA self-regulation, which becomes legally binding upon formal recognition by FINMA and applies as a minimum standard for the relevant industry participants generally.
FINMA has recently recognized the revised AMAS Code of Conduct, and the AMAS Guidelines as minimum standards applying to all Swiss market participants which manage, hold or represent collective investment schemes.
By contrast, following the expiry of the applicable transitional provisions, the rules of conduct at the point of sale are exclusively governed by FinSA. In particular, the former AMAS Guidelines on the distribution of funds will be abolished as of January 1, 2022.
An updated AMAS model fund distribution agreement has been published for use on a voluntary basis exclusively.
The finalisation of the AMAS self-regulation and its recognition in part by FINMA as a minimum standard is the result of a complex process, involving not only industry experts, but also, for the first time, a formal consultation process initiated by FINMA.
Key Amendments
Code of Conduct
The Code of Conduct forms the core of the AMAS self-regulation as it sets the rules of conduct applicable in the fund business. It is based on Art. 20 CISA and specifies the general duties of information, loyalty and care imposed on fund promoters. The ultimate goal is to align those general duties applicable to funds as financial products with those applying at the point of sale under FinSA. The updated AMAS Code of Conduct is thus now limited to rules of conduct at the product level and includes rules on transparency, loyalty and conflicts of interests, such as disclosures of retrocessions and rebates, and best execution rules as well as limitations, which apply for real estate funds in case of transactions with closely related persons.
In this context, the Code of Conduct now incorporates the former AMAS Transparency Guidelines, whose provisions may also be relevant for foreign funds promoters.
The scope of application of the Code of Conduct includes fund management companies ("ManCo"), Swiss representatives of foreign collective investment schemes, and investment managers of collective assets. It applies irrespective of whether or not a given financial institution is a "financial services provider" under FinSA. In practice, it is expected that the
new Code of Conduct will be indirectly imposed on foreign institutions, e.g. to foreign funds by their Swiss representatives, to the extent applicable, and to foreign delegated asset managers of Swiss funds by the relevant ManCo.
Model Fund Distribution Agreement
The former AMAS model fund distribution agreement has been revised. It is no longer a legally required document; FINMA has therefore opted not to recognize it as a minimum standard. The introduction of new rules of conduct at the point of sale through FinSA explains this new approach. This being said, the AMAS Code of Conduct imposes on Swiss institutions an obligation to document any distribution agreements, based either on internationally recognised standard distribution agreements or on distribution agreements, which meet Swiss market standards. The new AMAS model distribution agreement is therefore expected to remain relevant in practice in many circumstances. Furthermore, it will remain of essence also for tax reasons in order to meet the Swiss requirements for the exemption, where applicable, of Swiss VAT of trailer fees.
The first experiences in practice show that there is no "one size fits all" approach to reorganise existing fund distribution arrangements, but case-by-case analysis is required to decide whether (i) the conclusion of a new distribution agreement might be appropriate, or (ii) whether targeted amendments to the existing distribution agreement might be preferable. In that context, there is no requirement or obligations for the Swiss representative to be a contractual party to the distribution agreements. Should the Swiss representative wish to terminate existing distribution contract, the parties should take the necessary precautions to ensure the continued validity of their documentation, in particular for Swiss VAT purposes.
AMAS model documentation for Swiss funds
AMAS has entirely revised its template documentation for Swiss funds, which includes new fund contracts (for so-called contractual funds), new fund regulations (for SICAVs), and new template prospectuses. The revised documentation relates in particular to Swiss securities funds (the Swiss equivalent to UCITS in the EU), and to Swiss real estate funds, whether organised as contractual funds or as SICAVs. In addition, various linguistic improvements have been performed, especially in the French version. The Italian version is expected to be published shortly. The new model documentation for Swiss funds includes the following:
- Contractual fund in securities: fund contract
- Contractual fund in securities: prospectus
- Contractual fund in real estate: fund contract
- Contractual fund in real estate: prospectus
- SICAV in securities: fund regulation
- SICAV in securities: prospectus
- SICAV in securities: articles of association
- SICAV in real estate: fund regulation
- SICAV in real estate: prospectus
- SICAV in real estate: articles of association
Model Annex for foreign funds as "Information for Investors in Switzerland"
AMAS has also updated its model information for investors in Switzerland. Certain foreign collective investment schemes must include it into their prospectus, in particular those offered to non-qualified investors in Switzerland for the purpose of their registration with FINMA. Foreign collective investment schemes offered to investors under FinSA, who have opted to be classified as professional investors, i.e. HNWIs and their private investment structures without any professional treasury operations, will have to implement in part this model information.
Transitional Provisions
Market participants must implement the revisited AMAS self-regulation within the following deadlines:
The AMAS Code of Conduct and ancillary documentation will enter into effect on January 1, 2022 and must be implemented by then by the Swiss financial institutions which fall under its scope of application.
FINMA has extended the deadline for updating the documentation of Swiss funds to June 30, 2022. The update requirement includes both the funds regulations, fund contracts and prospectuses.
In respect of the KIDs for funds and structured products, in line with regulatory developments in the EU, the Swiss Federal Council has extended the deadline to produce KIDs to June 30, 2022.
There are no imposed deadlines to implement the revisited AMAS model distribution agreement. This said, the former model distribution agreement remains mandatory under the transitional provisions of FinSA until the relevant financial institutions involved in distribution have implemented FinSA, something which must be finalised by December 31, 2021. Further, if one of the parties terminates the existing agreement, there will be a need to replace it without delay by a new documentation that meets the standards set by the AMAS Code of Conduct and, moreover, by the Swiss tax administration for VAT purposes.
Conclusions
The revised AMAS self-regulation, which the FINMA has in part recognized as a minimum standard, impacts both Swiss and foreign market participants in the fund industry.
The key implications for Swiss institutions relate to the implementation of the new self-regulation both within their own institutions, as well as at the product level, i.e. by adapting the fund documentation to the new AMAS templates. In this context, a special attention must be paid to the fact that in particular the French versions have been significantly improved with a number of linguistic and translation enhancements.
For foreign funds and their Swiss representatives, the key question will be to smoothly adapt the existing model distribution agreement to the new model and, in particular, to effectively (where desired) terminate the Swiss representative and paying agent as contractual parties, without creating any gap in the contractual framework for VAT exemption purposes.
Finally, for foreign investment managers of Swiss funds, the implementation of the revised fund documentation, whether as a consequence
of the reference in the investment management agreement to the AMAS Code of Conduct or the revision of the fund documentation, may have a certain number of impacts at an operational level in the context of the performance of their functions as delegated investment managers of Swiss 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.
