The Asset Management Review: Switzerland

Overview of recent activity

With its long tradition of banking and finance, Switzerland is one of the leaders at the international level in the asset management industry. Swiss asset management constitutes one of the main pillars of the Swiss financial centre.

The asset management industry in Switzerland is heterogeneous and applies different business models. Large banking institutions active in wealth management (private banking) coexist with a number of smaller niche players. Independent asset managers represent the lion's share of the para-banking sector within the Swiss financial industry, with, until recently, a limited level of regulatory oversight. This situation drastically changed with the entry into force of two new statutes in January 2020 – the Financial Institutions Act (FinIA) and the Financial Services Act (FinSA) (see Section II.ii). These new Acts materially affect the organisation and activities of independent asset managers who are to review and adapt, as the case may be, their business model accordingly.

Current challenges to the asset management industry in Switzerland include a wave of regulatory activity and regulatory developments occurring at the EU level. The Swiss legal and regulatory framework is being adjusted on an ongoing basis to ensure its euro-compatibility, to keep it in line with international standards and to enhance the protection granted to investors.

General introduction to the regulatory framework

Switzerland does not have a comprehensive licence for all financial services providers. Certain financial activities require licences, whereas others can be conducted on an unregulated basis. The following financial services providers are subject to prior licensing and ongoing prudential supervision by the Swiss Financial Market Supervisory Authority (FINMA) or, indirectly, by supervisory organisations (SOs):

  1. banks;
  2. insurance companies;
  3. securities firms;
  4. asset managers and trustees; and
  5. fund management companies and managers of collective assets, including investment schemes (CISs).

Switzerland is not a Member State of the EU; therefore, EU rules and regulations do not apply directly to financial services activities conducted in Switzerland.

In addition to anti-money laundering (AML) rules that apply to all asset managers in Switzerland (see Section II.i), the conduct of asset management activities is, since 1 January 2020, subject to supervision (see Section II.ii). These activities conducted in connection with CISs or of occupational pension schemes assets (see Section II.iii), or involving the trading of securities (see Section II.iv) are further subject to specific regulations. In light of its practical relevance, we further set out an overview of the rules applicable to the offer, in or from Switzerland, of interests in non-Swiss CISs (see Section II.v).

i Regulation of asset management

Swiss Anti-Money Laundering Act (AMLA)

Under the AMLA, asset managers are considered as financial intermediaries, and as such are subject to the Swiss regulations against money laundering. The AMLA is based on the standards adopted by the Financial Action Task Force on Money Laundering (FATF). In particular, the AMLA requires that the relevant financial intermediary registers with and is subject to the supervision of a self-regulatory body recognised by FINMA (SRO), unless it is subject to licensing and supervision directly by FINMA (such as banks and other regulated firms).

The duties imposed upon financial intermediaries under the AMLA are essentially know-your-customer (KYC) rules and procedures, as well as certain organisational requirements (e.g., internal controls, documentation and continuing education).2 In addition, financial intermediaries are required to report suspicious transactions to a regulatory body, the Money Laundering Reporting Office Switzerland (MROS). This reporting duty presupposes that the financial intermediary is aware, or has reasonable suspicion, of the criminal origin of the assets involved.3 In this context, the MROS is also entitled to request information from third-party financial intermediaries that appear to be involved in the relevant transaction or business relationship that triggered the reporting by another financial intermediary.

Under Swiss law, financial intermediaries must implement a two-step process after the reporting of suspicions to the regulatory body. First, they have to monitor the account in question for a period of up to 20 days during the review of the case by the regulatory body (with the aim of blocking any transaction that may result in preventing or complicating the confiscation of the involved assets). As a second step, if the case is assigned to a criminal prosecutor, the financial intermediaries have to implement a full freeze on the account for up to five days until a decision to maintain the freeze is made by the criminal authority. An immediate freezing of assets is, however, required for assets connected to persons whose details were transmitted to the financial intermediary by FINMA, the Federal Gaming Board or a self-regulatory organisation due to a suspicion of such persons being involved with or supporting terroristic activities. Financial intermediaries may incur criminal liability if they fail to comply with these duties.

On 1 June 2018, the Federal Council launched a consultation procedure on a new revision of AMLA. The purpose of this revision was to reflect the outcome of the latest review of the Swiss AML framework performed by the FATF. Among other things, the initial draft provided for the extension of due diligence obligations to advisory services related to the setting up, management and administration of offshore companies and trusts, regardless of the absence of any purely financial intermediation activity. However, this extension of the scope of AMLA obligations to client advisors was challenged in the course of the parliamentary debates and is no longer included in the final draft of the AMLA adopted on 19 March 2021. In a nutshell, the main changes focus, inter alia, on the verification of the information provided on the identity of the beneficial owner against reliable sources and on the requirement to periodically review the KYC information provided by clients. Further, the revised AMLA provides for the removal of the 20-day period during which the regulatory body is to review the reporting made by the financial intermediary and revert, as the case may be. This last point aims at allowing the regulatory body to prioritise the filings and treat them in a more efficient manner. The final draft is still subject to a voluntary popular referendum period expiring on 8 July 2021.The entry into force of the revised AMLA is expected for mid-2022.

ii Regulation of asset managers under the new FinIA and FinSA

Under the FinIA, asset managers are newly subject to FINMA supervision (including authorisation process and enforcement proceedings). Their day-to-day supervision is, however, handled by SOs approved and monitored by FINMA. Further, under the FinSA, asset managers are subject to specific rules of conduct and organisational measures, which are applicable to all financial service providers active in Switzerland or towards clients in Switzerland on a cross-border basis.

The Financial Institutions Act

The FinIA defines an asset manager as anyone who, acting on a professional basis, disposes of clients' assets in their name and for their benefit. Under the implementing ordinance of the FinIA (FinIO), an activity is considered to be undertaken on a professional basis if any of the following thresholds are exceeded:

  1. business relationships with more than 20 contracting parties;
  2. gross turnover exceeding 50,000 Swiss francs; or
  3. power to dispose of third-party assets above 5 million Swiss francs.

The FinIA and the FinIO further provide for a limited number of exemptions. One of them provides that asset managers who exclusively manage assets of clients with whom they have 'economic' or 'family' ties do not fall within the ambit of the FinIA and do not, as a result, need to obtain a licence to conduct their activities. Likewise, pure investment advisory activities (without any control over clients' assets) remain unregulated, subject to the provisions of the FinSA (see below).

Under the new FinIA regime, in addition to the 'fit and proper' tests imposed on managers and qualified shareholders, the main licensing requirements for asset managers are the following:

  1. the registered office and administration of the asset manager must be in Switzerland;
  2. the management is composed of at least two people having appropriate qualifications;
  3. the implementation of appropriate internal organisation, in particular as regards risk management and internal control mechanisms;
  4. a fully paid-up minimum share capital of 100,000 Swiss francs;
  5. a minimum equity equivalent to a quarter of the fixed annual costs according to the latest financial statements, up to 10 million Swiss francs; and
  6. the conclusion of a professional indemnity insurance or the provision of sufficient financial guarantees.

The FinIA provides for different transitional periods depending on when the asset managers started their activities. In particular, asset managers that were already active prior to 1 January 2020 were to notify FINMA of their intention to apply for a licence prior to July 2020 and request an authorisation by 1 January 2023. In the meantime, in order to pursue their activities, they need to be registered with an SRO for AML purposes. By contrast, asset managers that started their activities in 2020 had to notify FINMA and comply with the licensing requirements immediately, and they are required to register with an SO and apply for a licence with FINMA within one year of an SO being recognised by FINMA (i.e., by July 2021, insofar as the first SOs were recognised in July 2020). Finally, asset managers starting their activities on or after 1 January 2021 may only carry out their activities once they have been granted authorisation by FINMA. To date, FINMA has granted licences to five SOs.

Foreign asset managers with a permanent presence in Switzerland also fall within the ambit of the FinIA and need to obtain an authorisation as a branch or representative office.

The Financial Services Act

Under the new FinSA, asset managers have to classify their clients (see Section II.v) and apply the relevant rules of conduct based on this classification. The provision of asset management activities (as well as pure investment advisory activities) requires compliance with rules of conduct such as: (1) an up-front obligation of information; (2) an obligation to verify whether a financial instrument or service is appropriate and suitable; (3) a documentation obligation and accountability requirement; and (4) transparency and due diligence requirements for the execution of client orders. In particular, when advising clients on individual transactions in the context of advisory or discretionary asset management services, financial services providers have to assess the appropriateness of the contemplated investment. By contrast, they have to assess the suitability when providing investment advice on the clients' entire portfolio and for discretionary asset management services. Finally, under the new regime, asset managers have to ensure that the client advisers have the technical knowledge, follow appropriate training and implement relevant organisational measures. Those requirements have to be complied with by 1 January 2022.

In relation to the rules of conduct, the topic of the retrocessions paid by third parties within asset management activities (i.e., inducements), has generated considerable interest and controversy in the Swiss financial sector. Pursuant to Swiss case law, asset managers are entitled to retain retrocessions and other distribution fees they receive in connection with their mandate only on the basis of a comprehensive waiver based on the informed consent of the client. In all other circumstances, the client is entitled to such retrocessions and fees. Those principles, deriving from Swiss case law, were implemented in the FinSA. The disclosure requirement applies irrespective of any mandate relationship (i.e., including 'execution only' transactions) and have been recently extended by Swiss courts to include an information on the order of magnitude of the expected retrocessions. As a result, receiving retrocessions is allowed as long as the recipient specifically discloses those retrocessions, obtains the client's informed consent based on sufficient information and provides detailed information on the amounts effectively received upon the client's request.

In addition, under the FinSA, since 24 December 2020, asset managers are required to be registered with a mediation body unless the financial services are provided exclusively to per se professional clients and institutional clients (see Section II.v).

Finally, the FinSA introduced an obligation for client advisers to register with a specific register held by a registration body in the case where the client adviser is not employed by a financial institution that is itself subject to FINMA prudential supervision. This obligation also extends to client advisers of foreign financial services providers providing financial services to clients in Switzerland on a cross-border basis, unless a statutory exception applies. In this respect, an exemption applies for client advisers of foreign financial institutions subject to prudential supervision in their home jurisdiction from the duty to register, provided that such client advisers only provide financial services to professional and institutional clients (see Section II.v). To date, three registration bodies have been authorised by FINMA (i.e., BX Swiss AG, the Association Romande des Intermediaires Financiers (ARIF) and PolyReg Services GmbH). The obligation to register client advisers has been applicable since 19 January 2021.

iii Regulation of managers of collective assets

Pursuant to the FinIA, fund management companies and fund asset managers of CISs (Swiss and non-Swiss) as well as of occupational pension schemes must obtain a licence from FINMA. The FinIA contains a de minimis rule, according to which asset managers of non-Swiss CISs whose investors are qualified investors (as defined in the Collective Investment Schemes Act (CISA); see Section II.v) are not regulated if they satisfy one of the following requirements:

  1. the assets under management, including those resulting from the use of leverage, do not exceed 100 million Swiss francs; or
  2. the assets under management do not exceed 500 million Swiss francs, and the CISs are unleveraged and closed-ended for a five-year period (irrespective of whether the CISs are invested in target funds or other investments).

Asset managers managing below threshold assets in CISs are, however, required to obtain an authorisation with FINMA as asset managers under the new FinIA.

In addition, the FinIA provides for a limited number of exemptions, namely, under certain conditions, when the assets under management belong to group companies of the manager or to persons having family ties with the manager.

Non-Swiss managers of both Swiss and non-Swiss CISs with a permanent presence in Switzerland through a branch or representative office in Switzerland are also required to obtain a licence from FINMA.

iv Regulation of professional securities trading

Depending upon the structure of their activities and of their client relationships, certain Swiss asset managers could fall within the ambit of the Swiss regulatory framework governing securities firms.

Professional trading in securities as a principal is, subject to certain exceptions, a regulated activity.

Under the FinIA, the concept of securities firms is defined as any person or entity who, on a commercial basis, trades in securities:

  1. in its own name but on behalf of clients;
  2. for its own account on a short-term basis, operates essentially on the financial market and (1) may have a negative impact on the functioning of the financial market or (2) participates in a trading venue; and
  3. for its own account on a short-term basis and quotes a price for specific securities on an ongoing basis or upon request (market maker).

Underwriters' and derivative houses' activities are subject to licensing requirements under the FinIA and necessarily have to be conducted by licensed banks or securities firms. Existing securities firms do not need to obtain a new licence but have to comply, by January 2021, with the new regime's requirements that do not significantly differ from the existing ones.

Swiss securities firms are subject to FINMA supervision and are required to comply with organisational, conduct of business and prudential requirements broadly comparable with those applicable to Swiss banks. As a rule, asset managers or investment advisers that manage the assets of third parties on the basis of powers of attorney (i.e., who are acting as agent) are not characterised as securities firms for the purpose of the FinIA but as asset managers and are further regulated under the AMLA (see Section II.i).

v Regulatory framework applicable to the offering of non-Swiss CISs

The regulatory concepts of offering, advertising and financial services

Under the new regulatory framework, the former concept of 'distribution' of CISs has been abolished and replaced by the concepts of 'offer' and 'advertisement' of financial instruments, as well as with the concept of 'provision of financial services'. Generally, an offer or advertisement of a financial instrument may trigger the 'product level' requirements to appoint a Swiss representative and paying agent for non-Swiss CISs under the CISA. The provision of financial services triggers various consequences under the FinSA and is described above (see Section II.ii).

An 'offer' is defined as any invitation to acquire a financial instrument that contains sufficient information on the conditions of the offer and the terms of the financial instrument. The following four situations outlined below do not fall within the definition of an offer:

  1. the provision of information in reverse solicitation cases, where no advertisement related to any specific financial instrument has been made by the financial service provider or an agent thereof;
  2. the nominal indication of financial instruments, accompanied, where applicable, by factual information (e.g., International Securities Identification Number code, net asset value (NAV), prices, information on risks, price trends and tax data);
  3. the mere provision of factual information; and
  4. the preparation, provision, publication and transmission to existing clients or financial intermediaries of information and documents prescribed by law or contract relating to financial instruments.

'Advertisement' is defined as any communication aimed at investors that draw their attention to certain financial services or instruments. Under the new regime, advertisement for a CIS must be clearly identifiable as such. Further, it must mention the prospectus and the key information document and where these documents can be obtained. The following, however, does not constitute an advertisement:

  1. the nominal mention of financial instruments, whether or not related to the publication of prices, rates, NAV, price lists, price movements or tax data;
  2. announcements as regards issuers or transactions, in particular if they are prescribed by law, by supervisory law or by rules specific to trading platforms;
  3. the provision or transmission by the financial service provider of an issuer's communications to existing clients; and
  4. articles in specialised press.

The definition of a 'financial service' under the FinSA includes the purchase and sale of financial instruments. Pure distribution activity understood as any activity addressed directly at certain clients that is specifically aimed at the acquisition or disposal of a financial instrument is considered as a financial service. Only the provision of information on financial instruments to end-investors qualifies as a financial service, however, which excludes interactions with supervised financial intermediaries acting on behalf of their clients.

Qualified investors

The requirements applicable to the offer and advertisement of CIS in Switzerland depend on the regulatory status of the targeted investors. The revised CISA maintains the distinction between qualified investors and non-qualified investors, but the definition of qualified investors has been adjusted to align it with the client segmentation provided for by the FinSA. In particular, all institutional and professional clients under the FinSA are qualified investors under the CISA. The FinSA introduced a flexible regime allowing opting-in and opting-out across different categories of clients. This election impacts the level of protection applicable to the relevant investors.

Qualified investors include the following:

  1. 'institutional clients' as defined by FinSA, namely:
    • financial intermediaries as defined in the Banking Act of 8 November 1934 (BA), the FinIA and the CISA;
    • regulated insurance companies;
    • foreign clients subject to a prudential supervision in a similar way as financial intermediaries and insurance companies; and
    • central banks;
  2. other 'professional clients' as defined by the FinSA, namely:
    • public entities with professional treasury operations;
    • occupational pension schemes or other institutions whose purpose is to serve occupational pensions with professional treasury operations;
    • companies with professional treasury operations;
    • large companies (i.e., companies that exceed two of the following parameters: (1) balance sheet total of 20 million Swiss francs; (2) turnover of 40 million Swiss francs; and (3) equity of 2 million Swiss francs); and
    • private investment structures with professional treasury operations created for high-net-worth retail clients;
  3. high net worth individuals and private investment structures created for high net worth individuals (i.e., persons with a minimum net wealth of 2 million Swiss francs, or persons with the required professional training and experience combined with a minimum net wealth of 500,000 Swiss francs) having declared that they wish to be treated as 'professional clients'; and
  4. managed and advisory clients of financial service providers under certain conditions.

Investors who are not included in one of the above categories are non-qualified investors. The characterisation of an investor as being qualified has a bearing on the regulatory restrictions applicable to the offering and advertisement of interests in CIS under the CISA (see below). Further, the segmentation in private, professional or institutional clients has an impact on the requirements applicable under FinSA (with respect to information duties, appropriateness and suitability checks, accountability and documentation obligations, and transparency and diligence requirements).

Offering of non-Swiss CISs

Under the new regime, the requirements for the offering and advertising of non-Swiss CISs to non-qualified investors (i.e., retail clients) have not materially changed. Foreign CISs are subject to FINMA prior authorisation to be offered or advertised to non-qualified investors. Likewise, a paying agent and a representative have to be appointed and cooperation agreements have to be in place.

The regime applicable to the offering of non-Swiss CIS to qualified investors has become more liberal. Only the offering of non-Swiss CISs to high net worth individuals and their investment structures without professional treasury management, provided they have opted out, triggers the need for the non-Swiss CIS to appoint a paying agent and a representative. Otherwise, the offering of non-Swiss CISs to other qualified investors (i.e., institutional and professional clients under the new client classification), including managed and advisory retail clients, is not subject to specific requirements on the non-Swiss CIS. However, the new regime only applies as of 31 December 2021 or once the relevant financial service provider has implemented the FinSA rules of conduct and organisational measures, whichever comes first. As a result, until then, any offering of non-Swiss CISs to qualified investors generally requires compliance with the former rules. In particular, this includes the appointment of a Swiss representative and a Swiss paying agent. These requirements do not apply if solely institutional investors (as defined above) are targeted or in instances where the 'offering' would not have constituted 'distribution' under the former regime.

Common asset management structures

From a Swiss legal perspective, asset management services can be rendered either on the basis of a power of attorney that the client grants to the asset manager in relation to assets deposited with a bank (managed account) or through an investment, by the client, in interests or shares of a CIS.

The CISA provides for four different types of CISs for Swiss CISs:

  1. the Swiss contractual investment fund;
  2. the Swiss investment companies with variable capital (SICAV);
  3. the Swiss investment company with fixed capital (SICAF); and
  4. the Swiss limited partnership for collective investment (Swiss LP).

The main characteristics of these legal institutions are set out below. One common requirement is for the Swiss CIS to have substance in Switzerland.

i The Swiss contractual investment fund

The Swiss contractual investment fund is a contractual pool of assets constituted for purposes of common investment, which is separately administered by a licensed fund administration company. The fund administration company, acting on behalf of the investors, deposits the assets of the investment fund with a custodian bank. This legal institution is the most commonly used structure in the Swiss asset management industry.

ii The SICAV

The Swiss SICAV is a special corporate vehicle governed by the CISA and subject to the supervision of FINMA. The corporate purpose of the Swiss SICAV is limited to the collective management of its own assets. Unlike a licensed fund administration company, a SICAV may not perform other activities or services, even ancillary ones such as the management of third-party assets. The Swiss SICAV is in many respects based on the model of the Luxembourg SICAV. The CISA distinguishes between self-managed and externally managed SICAVs. The relevant criterion is whether the SICAV performs its own administration or whether such administration is delegated to a licensed fund administration company. The Swiss SICAV has two types of shares: investor shares and promoter shares. It is thus composed of at least two segregated sub-funds, corresponding respectively to the contributions of the investors and the promoter. Both types of shares have, as a rule, the same rights and obligations: votes are based on the principle of one share, one vote; there are no restrictions for a holder of one category of shares to also hold shares of the other category; and the creation of preference shares is expressly prohibited. There are important exceptions to the principle of equal treatment among the shareholders. For instance, the obligation to provide for the minimum capital contribution, as well as the duty to maintain the required capital adequacy for self-managed SICAVs, fall solely upon the holders of promoter shares who have the exclusive competence to resolve on the dissolution of the SICAV, to close a sub-fund and to request FINMA to liquidate the SICAV for cause.

SICAVs are required to keep a register of the ultimate beneficial owners (i.e., individuals owing more than 25 per cent of the company's shares or voting rights) of its unlisted promoter shares. In parallel, holders of those shares are subject to a reporting obligation towards the SICAV. They are to disclose the name and the address of the ultimate beneficial owners in the event that their participation reaches or exceeds 25 per cent. Breach of this reporting requirement may trigger restrictions or the cancellation of the economic and voting rights related to the investment.

iii The SICAF

The SICAF is a Swiss company limited by shares whose corporate purpose is limited to the management of its own assets. The SICAF is not allowed to pursue any entrepreneurial activity. It is a closed-ended investment scheme, meaning that the investors do not benefit from a redemption (i.e., exit) right. The regulatory framework set forth in the CISA as regards the SICAF is rather limited. The SICAF is substantially governed by the provisions of the Swiss Code of Obligations applicable to regular companies limited by shares (including the disclosure requirements as regards shareholders and ultimate beneficial owners) (see Section III.ii). In this context, a SICAF is not subject to the CISA if its shares are listed on a stock exchange or if its shareholders are exclusively qualified investors (see Section II.v) and its shares are registered shares. To our knowledge, all Swiss SICAFs have so far relied on this regulatory safe harbour. As a result, there are currently no Swiss SICAF regulated by FINMA.

iv The Swiss LP

The Swiss LP is a CIS that is aimed at private equity, alternative investments and real estate projects. Further, it has been designed to mirror the legal form of certain offshore limited partnership structures. The Swiss LP is subject to the supervision of FINMA. It is a closed-ended investment scheme, meaning that the investors do not benefit from a redemption (i.e., exit) right. The Swiss LP is managed by one or more general partners (GPs) with unlimited liability for the commitments of a Swiss LP. The GP may delegate certain tasks to third parties to the extent that such delegation is in the best interest of the Swiss LP. The asset management function may, however, only be delegated to a regulated asset manager of a Swiss CIS. The investors in a Swiss LP are the limited partners. They may not be involved in the management of the Swiss LP, which is the exclusive competence of the GP. However, the limited partners benefit from information rights and certain governance rights, such as the delivery of periodic financial information, as well as information on the financial accounts. The Swiss LP is only open to qualified investors (see Section II.v). The partnership agreement of the Swiss LP sets out the key rules applicable among the GP and the limited partners. Swiss law allows the parties significant freedom to regulate their relationship in the partnership agreement, which is only subject to a limited set of contractual provisions that are required as a matter of law.

Main sources of investment

The Swiss asset management industry is heavily reliant upon the assets deposited with Swiss banking institutions. According to figures published by the Swiss Bankers Association in its 2020 Banking Barometer Report, the aggregate amount of assets under management held by Swiss banks amounted to over 7.9 billion at the end of 2019, growing from 6.9 billion Swiss francs at the end of 2018. This total is divided equally between assets held by Swiss-based and non-Swiss-based clients. According to the Asset Management Association Switzerland, the Swiss CIS market was valued at 1.368 billion Swiss francs in February 2021.

Key trends

i Implementation of the automatic exchange of information in Switzerland

Another topic of current interest is the implementation of the automatic exchange of information, and in particular, its practical implications in the asset management field.

The obligations imposed by the legal framework rely on the Common Reporting and Due Diligence Standard elaborated by the OECD. To comply with these obligations, as transposed into Swiss law or in an international agreement, Swiss financial intermediaries such as banks have to collect and exchange foreign clients' information, including information on beneficial owners, with the Swiss tax authorities. These transmit, in turn, this information to the tax authorities of the country of residence of the taxpayers, who have an agreement in place with Switzerland in this respect. The entry into force of this new automatic exchange regime took place in January 2017. As a result, the first automatic exchanges of information with foreign countries took place in 2018.4

The introduction of the automatic exchange of information constitutes a complete change of paradigm in Switzerland, where banking secrecy does not allow the disclosure of any information outside the bank–client relationship (subject to certain exceptions). The impact of this significant change on the cross-border asset management industry in Switzerland, which represents a market share of more than 25 per cent at the international level, is difficult to assess for the time being.

ii Limited qualified investment funds

Switzerland aims at improving competitiveness in the area of collective investments. A legislative process is currently underway to introduce a new category of funds that are neither subject to approval by FINMA nor regulated under the CISA. The proposal is discussed by the Swiss parliament in the course of 2021. This new category of funds, limited qualified investment funds (L-QIFs), would be exclusively reserved for qualified investors. L-QIFs would not be a new legal form. Existing contractual funds, Swiss LPs and SICAVs may be used as a basis of a L-QIF. As a result, existing Swiss CISs currently supervised by FINMA that would qualify as L-QIFs, will be able to request the withdrawal of FINMA supervision. It is intended that the absence of FINMA authorisation and supervision for L-QIFs would be mitigated by the fact that L-QIFs would need to be managed by a fund management company itself supervised by FINMA. No limitation is expected to be imposed on the permitted investments by L-QIFs, which would be able to invest in any financial instruments as well as in cryptocurrencies or other specific products. Entry into force of the L-QIF regime is currently expected for mid-2022 or early 2023.

Tax law

Switzerland levies taxes at three different levels: the federal, cantonal and municipal levels.

i Taxation of CISs

As a matter of principle, Swiss CISs are not liable to income and capital taxes. Taxation does not take place at the level of the CIS, but usually directly targets (Swiss-resident) investors (see Section VI.iii), provided the CIS is deemed transparent for tax purposes. The taxation of CISs in Switzerland largely depends upon the legal structure under the CISA. Open-ended CISs, such as the contractual investment fund and the SICAV, are not considered entities subject to Swiss corporate income tax in their own right. In conformity with the principle outlined above, taxation is applied directly to investors according to their country of tax residence. The same regime is applicable to the Swiss LP. There are two exceptions to these general taxation principles: CISs owning real estate are taxed as corporations on the portion of their income that is directly derived from real estate; and a SICAF is subject to Swiss corporate income tax as it is treated as a separate taxpayer under Swiss tax law.

All income that is distributed by these CISs is subject to a withholding tax of 35 per cent, which is entirely or partially recoverable by the investor (as regards investors based outside of Switzerland, the reimbursement of the withholding tax depends upon the provisions of the applicable double tax treaty). Exceptions to this general principle are possible. For example, a distribution of net capital gains realised by a CIS is exempted provided that these capital gains are clearly separated from the income.

ii Taxation of fund administration companies

Fund administration companies are considered as taxpayers in their own right as they are incorporated as a corporation. They are subject to corporate income tax as any other legal entity. Management and distribution services provided by such companies to Swiss and non-Swiss CISs remain generally exempt from Swiss value added tax.

iii Taxation of investors

Swiss-resident investors of CISs that are transparent for tax purposes are taxed on their share of fund income. This taxation principle depends on the structure of the fund (i.e., distributing or growth) and the income received (i.e., capital gains or other ordinary income realised by the CIS). Capital gains attributable to private investors are normally exempted provided that they are distributed with a separate coupon or they are separately booked in the accounts of the CIS.

iv Stamp duty

Stamp duty is due on the transfer of securities, including interests in CISs, provided that the transaction involves a Swiss securities firm for stamp duty purposes acting as a broker or as a counterparty. Many exemptions may apply in specific cases: for example, Swiss or non-Swiss CISs qualify as 'exempt investors' for stamp duty purposes. Accordingly, transactions involving Swiss or non-Swiss CISs acting as purchasers or sellers of taxable securities normally trigger a reduced stamp duty liability. Swiss asset managers usually qualify as Swiss securities firms for stamp duty purposes and may in practice delegate most of their obligations in relation to stamp duty to other Swiss securities firms. Nonetheless, Swiss stamp duty rules involve specific compliance requirements, such as a duty to register with the Swiss tax authorities.


The new supervision of asset managers under the FinIA and the FinSA, together with the implementation of automatic exchange of information, represents another example of the regulatory adjustments implemented in Switzerland to fully align the Swiss regulatory framework with international standards. The FinSA regime further represents a major change both for domestic asset managers and foreign asset managers providing financial services to Swiss-based clients (see Section II.ii). As regards non-Swiss financial service providers, this constitutes a major shift from the liberal regime applicable to the provision of inbound cross-border financial services on Swiss soil prior to 1 January 2020. In summary, subject to certain exemptions depending on client classification, the consequences of the application of the FinSA as a result of the provision of financial services are the following: (1) client segmentation between institutional, professional and retail clients; (2) the obligation to comply with rules of conduct; (3) the obligation to comply with organisational measures; (4) the affiliation with an ombudsman office; and (5) the registration of client advisers (i.e., individuals who actually provide financial services within a given institution or on their own) in a register. Another topic of interest will remain the issue of retrocessions. In line with the developments taking place at the international level, Switzerland's asset management industry is in the process of adjusting its remuneration structure to be less reliant on retrocessions. Nevertheless, contrary to the situation prevailing in the European Union, retrocessions remain allowed albeit in a more transparent and restrictive manner.


1 Shelby R du Pasquier is a partner and Isy Isaac Sakkal is a senior associate at Lenz & Staehelin.

2 Article 3 et seq. AMLA.

3 Articles 9 and 10 AMLA.

4 To date, Switzerland has implemented automatic exchange of information with more than 100 partner states and territories, including all Member States of the EU.

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