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 1 January 2020, 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). As we will see, those 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.

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 do 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) and, as the case may be, supervisory organisations (SOs):

  1. banks;
  2. insurance companies;
  3. securities firms;
  4. asset managers and trustees; and
  5. fund administration companies and managers of collective 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 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. These activities conducted in connection with a CIS (see Section II.iii), or involving the trading of securities (see Section II.iv) or the management of Swiss pension funds assets (see Section II.v) 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 a non-Swiss CIS (see Section

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, which are based on the standards adopted by the Financial Action Task Force on Money Laundering (FATF). In particular, AMLA requires that the relevant financial intermediary registers with and is subject to the supervision of a self-regulatory body recognised by FINMA, unless it is subject to licensing and supervision directly by FINMA (such as banks and other regulated firms). A transitory regime applies to asset managers that are to be licensed under the new FinIA from 1 January 2020. They are, in order to pursue their activities, to be registered with a SRO, as long as they have not obtained their licence within the three-year transitional deadline (see Section II.ii).

The duties imposed upon financial intermediaries under AMLA are essentially know-your-customer 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 the regulatory body. 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 regulatory body is also entitled to request information from third-party financial intermediaries that appear to be involved in the 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 concerned 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 the details of whom 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.

It is worth noting that on 1 June 2018, the Federal Council opened up a consultation procedure on a new revision of AMLA. The purpose of this revision is to reflect the outcome of the latest review of the Swiss AML framework performed by the FATF. Among other things, the draft provides 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. The draft further provides for the removal of the 20-day deadline until which the regulatory body is to review the reporting made by the financial intermediary and revert, as the case may be. The Federal Council enacted its dispatch on 26 June 2019. The draft will be discussed at the parliamentary level in the second part of 2020. The entry into force of the revised AMLA is not expected before 2021.

ii Regulation of asset managers under the new FinIA and FinSA

Under the FinIA and the FinSA, asset managers are newly supervised and, as a result, are now subject to specific rules of conduct and organisational measures. In this context, asset managers are subject to FINMA supervision (including authorisation process and enforcement proceedings). Their day-to-day supervision is, however, handled by supervisory organisations approved and monitored by FINMA (SOs).

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;
  3. power to dispose of third-party assets above 5 million Swiss francs; or
  4. transactions with a total amount in excess of 2 million Swiss francs.

The FinIA and 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 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 grandfathering rules according to which 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 prior to January 2023. By contrast, asset managers that started their activities after January 2020 have to notify FINMA immediately and comply with the licensing requirements. In accordance with the FinIO, asset managers are, however, to register with a SO and apply for a licence with FINMA within one year of an SO being recognised by FINMA. On 7 July 2020, two SOs had been licensed, with effect as of 6 July 2020, namely the Organisme de Surveillance des Instituts Financiers (OSIF) and the Organisation de Surveillance Financière (OSFIN). It is expected that FINMA will grant licences to further SOs.

Foreign asset managers with a permanent presence in Switzerland now also fall within the ambit of the FinIA and need to obtain an authorisation as a branch or representative office. Likewise, foreign asset managers providing their activities on a purely cross-border basis have to register the individuals providing financial services (client advisers) in a client advisers' registry (see below). As financial service providers, client advisers and the entities for which they act further have to comply with the rules of conduct and organisational measures below.

The Financial Services Act

Under the new FinSA, the provision of asset management activities (including purely 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. Furthermore, asset managers have to classify their clients (see Section and apply the relevant rules of conduct based on this classification. Finally, under the new regime, asset managers have to ensure that the client advisers have the technical knowledge and follow appropriate training and implement relevant organisational measures.

In accordance with the grandfathering rules of the FinIO, those requirements have to be complied with by 2021. Separately, asset managers also have to be registered with a mediation body within six months of the recognition of such a body by the Federal Department of Finance. On 24 June 2020, the Federal Department of Finance officially recognised four first mediation offices. It is worth noting that, as part of the draft legislation to adapt Swiss law to developments in distributed ledger technologies, the exclusion from the scope of the duty to affiliate of service providers offering financial services exclusively to institutional or per se professional clients (see Section II. Vi) is currently being discussed at the parliamentary level. The new legislation is expected to enter into force only after the end of the six-month deadline to be affiliated.

In addition, the FinSA introduced an obligation for client advisers to register with a specific register held by a registration body, if 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, unless a statutory exception applies. In this respect, the FinSO exempts client advisers of foreign financial institutions subject to prudential supervision in their home jurisdiction from the duty to register, provided that those target only professional and institutional investors (see Section On 7 July 2020, FINMA announced that it had authorized BX Swiss AG as the first registration body with effect as of 20 July 2020. It is expected that further registration bodies will be authorised by FINMA. Following the authorisation of BX Swiss AG, client advisers who are subject to a duty to register are to submit their registration application no later than 19 January 2021.

Retrocessions issue

On the topic of the retrocessions paid by third parties within asset management activities (i.e., inducements), 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 new FinSA. The disclosure requirement applies irrespective of any mandate relationship (i.e., including 'execution only' transactions). As a result, receiving retrocessions is allowed as long as the recipient specifically discloses those retrocessions, obtains the client's consent and provides detailed information upon the client's request.

iii Regulation of CIS managers

Pursuant to the FinIA, fund management companies and fund asset managers of both Swiss and non-Swiss CISs must obtain a licence from FINMA. That said, 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 CISA; see Section 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;
  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); or
  3. the assets under management belong to persons with whom the managers have business (e.g., group of companies or family ties).

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

Non-Swiss managers of both Swiss and non-Swiss CIS having a branch or representative office in Switzerland are also required to register with FINMA.

Finally, in July 2015, ESMA recommended to the EU authorities the extension of the marketing passport under the AIFMD to Switzerland (as a third country). In its final advice of September 2016, ESMA confirmed its position. The latter is being reviewed by the European Commission, Parliament and Council, which are to make a decision on a political level as to such extension. For the time being, Swiss-based alternative investment fund managers are to rely on the national private placements regimes in each EU country for the purposes of their marketing activities.

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 AMLA (see Section II.i; see also, however, Section II.v).

v Regulation of Swiss pension fund asset managers

Under the FinIA, Swiss pension fund asset managers (other than banks, securities firms and fund management companies) have to obtain a licence with FINMA to perform or continue to perform their activities if the assets they manage are above 100 million Swiss francs or, in the mandatory segment, if they manage more than 20 per cent of the assets of one occupational pension scheme. In the event that those thresholds are not reached, asset manages of pension funds are still required to obtain an authorisation as asset managers under the new FinIA (see Section II.ii).

FinIA's grandfathering rules provide that managers of pension funds had to notify their intention to request an authorisation from FINMA within six months of the entry into force of this new Act. Further, such managers will have to file their authorisation request, as well as comply with the new requirements, by January 2023. In the meantime, they may continue to perform their activities, provided they are registered with a SRO for AML purposes.

vi Regulatory framework applicable to the offering of interests in non-Swiss CISs

The regulatory concept of offering

Under the new FinSA, the former concept of distribution has been replaced with the concept of 'offering'. The latter is defined as an invitation to acquire a financial instrument that contains sufficient information on the conditions of the offering and the terms of the financial instrument. The definition of 'offering' is, therefore, more limited than the former understanding of 'distribution'.

Under the implementing ordinance of the FinSA (FinSO), 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 concerning 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., ISIN code, 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.

The definition of a 'financial service' under the FinSA includes the purchase and sale of financial instruments (e.g., units in CIS). 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 a financial service and, therefore, falls within the ambit of the FinSA.

Qualified investors

The requirements regarding the offering of a CIS in Switzerland depend on status of the targeted investors. The revised CISA maintains the distinction between qualified and non-qualified investors, but the definition of this concept has been adjusted to align it with the new regime implementing client segmentation under the FinSA.

Under the CISA, the definition of qualified investors is as follows:

  1. 'institutional clients' as defined by the FinSA are as follows:
    • financial intermediaries as defined in the Banking Act of 8 November 1934 (BA), the Financial Institutions Act of 15 June 2018 and the CISA;
    • regulated insurance companies;
    • foreign clients subject to a prudential supervision in a similar way to financial intermediaries and insurance companies; and
    • central banks;
  2. other 'professional clients' as defined by FinSA, are as follows:
    • 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 requirements: (1) a balance sheet total of 20 million Swiss francs; (2) turnover of 40 million Swiss francs; and (3) equity of 2 million Swiss francs);
    • 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 having 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' (i.e., 'opted-out HNWI' and 'private investment structures established for HNWI'); 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 of interests in CIS under CISA (see below). With the entry into force of the FinSA, the provision of financial services, as well as the offered financial products, are to be adapted to the protection needs of the respective client segment. In this context, no specific rules apply with respect to institutional clients. Likewise, professional clients have the possibility of waiving certain protections regarding information and documentation reporting.

The FinSA further provides for an opting in and out system across the different client categories. As an example, high net worth individuals and private structures created for them (without professional treasury management) have the possibility to opt out to be considered as professional clients (instead of private clients). The opting in and out declarations are to be made in writing.

Offering of non-Swiss CISs

Under the new regime, the requirements for the offering of non-Swiss CISs to non-qualified investors (i.e., retail clients) did not materially change. Foreign CISs have to be subject to FINMA prior authorisation. 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 have 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 without an opt-in declaration, is not subject to specific requirements on the non-Swiss CIS. That being said, the new regime only applies as of 31 December 2021 or once the relevant financial service provider has implemented FinSA rules of conduct and organizational 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, namely the appointment of a Swiss representative, and a Swiss paying agent, as well as the entry into of a written Swiss law-governed distribution agreement with the Swiss representative of the CIS, based on the requirements of the SFAMA guidelines on the distribution of CIS. These requirements do not apply if only 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 contractual investment fund;
  2. the SICAV;
  3. the Swiss investment company (SICAF); and
  4. the Swiss limited partnership (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 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 Swiss SICAV's corporate purpose 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 to determine 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. The SICAV is thus composed of at least two segregated sub-funds, corresponding to the contributions of the investors and the promoter, respectively. 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 hold also 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. The obligation to provide for the minimum capital contribution, as well as the duty to maintain the required capital adequacy requirements for self-managed SICAVs, rest only 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. The SICAF 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 that are applicable to regular companies limited by shares (including the disclosure requirements as regards holders of bearer shares 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 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 is currently no Swiss SICAF that is 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, and that has been designed to mirror the legal form of certain offshore limited partnership structures. The Swiss LP is subject to the supervision of FINMA. Swiss LPs are closed-ended investment schemes, meaning that the investors do not benefit from a redemption (i.e., exit) right. Swiss LPs are 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 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. That said, 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 The partnership agreement of the Swiss LP sets out the key rules that apply among the GP and the limited partners. Swiss law allows a significant freedom to the parties in the regulation of their relationship in the partnership agreement, 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 2019 Banking Barometer Report, the aggregate amount of assets under management held by Swiss banks amounted to over 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 SFAMA, the Swiss CIS market was valued at 1.194 billion Swiss francs in May 2020.

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.

To comply with the obligations imposed by the legal framework, which relies on the Common Reporting and Due Diligence Standard elaborated by the OECD, 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, and as a result, the first automatic exchanges of information with foreign countries have taken 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

In September 2018, the Swiss Federal Council announced its intention to introduce a new category of funds that are neither subject to approval by FINMA nor regulated under the CISA. This new category of funds, 'limited qualified investment funds', would be limited to qualified investors such as pension funds and insurers and would be managed exclusively by FINMA supervised fund asset managers.

This project aims at creating a Swiss alternative to similar foreign products and to ensure that more collective investment schemes be launched in Switzerland. The consultation procedure lasted until 17 October 2019. The proposal is expected to be discussed by the Swiss Parliament in the course of 2020.

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 to be 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 will be taxed on their share of fund income. This taxation principle will depend upon 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 that 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. Swiss stamp duty rules nonetheless 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 the automatic exchange of information, represents another example of the regulatory adjustments implemented in Switzerland to fully align the Swiss regulatory framework with international standards. Another topic of interest will remain the issue of retrocessions (see Section II.ii). 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, the Swiss legislative and regulatory perspective will keep allowing retrocessions albeit in a more transparent and restrictive manner.



1 Shelby R du Pasquier is a partner and Maria Chiriaeva 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 90 partner states and territories, including the EU.

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