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Switzerland is strenghtening its competitiveness as Fund Centre - a new, unregulated fund category for qualified investors is proposed

Posted by on 28 June 2019

The Swiss Federal Council initiated a consultation on an amendment of the Swiss Federal Act on Collective Investment Schemes (CISA), aiming to introduce a new, unregulated fund category called "Limited Qualified Investor Fund (L-QIF)", reserved exclusively for qualified investors. By introducing the L-QIF, Switzerland establishes a Swiss fund category similar to the Luxembourg Reserved Alternative Investment Fund (RAIF) or the Malta Notified Alternative Investment Fund (NAIF). The consultation of the Federal Council will last until 17 October 2019.

Limited-Qualified-Investor-Fund-FroriepAccording to the legislative proposal, the new L-QIF shall neither require an authorisation from, nor be approved and supervised by the Swiss Financial Market Supervisory Authority (FINMA). By being relieved from FINMA authorisation, approval and supervision, a L-QIF could be set up quick and cost-effectively. In addition, a L-QIF organised as an investment company with variable capital (SICAV), fixed capital (SICAF) or as limited partnership for collective investment schemes shall also be exempt from the scope of the Federal Act on Anti Money Laundering (AMLA) and consequently from affiliation with a self-regulatory organisation, provided that the entity responsible for the management of the L-QIF assumes the obligations set forth in the AMLA.

As a general rule, the provisions of CISA remain applicable to the L-QIF (except for the provisions on authorisation, approval and supervision). However, new specific investment provisions applicable to L-QIF shall be introduced which are designed to be liberal and will not impose limitations by law in relation to possible investments, risk diversification or leveraging. However, the investment strategy and investments restriction will have to be described in the fund documentation. Furthermore, as a further easement, the L-QIF shall be exempt from the prospectus requirements which will be imposed by the new Financial Services Act (FinSA, coming into force on 1 January 2020).

As a corrective to the relief from FINMA authorisation, approval and supervision and other easements, the
L-QIF is exclusively reserved for qualified investors, i.e. professional clients (such as institutional clients, pension schemes or companies with a professional treasury) according to FinSA, including high-net-worth individuals having declared consent to be treated as professional clients, as well as investors having a written discretionary management agreement with an asset manager unless they have opted out from being treated as professional clients.

Furthermore, the management of an L-QIF organised as a SICAV, SICAF or limited partnership for collective investment schemes must be mandatorily delegated to a FINMA regulated fund management company (whereby the fund management company may sub-delegate investment decisions to a manager of collective assets (Verwalter von Kollektivvermögen). If the L-QIF is organised as limited partnership for collective investment schemes with a bank or insurance company as general partner, no such mandatory delegation of management to a fund management company is necessary since the general partner is already supervised by FINMA.

As an additional measure of investor protection, the company name of a L-QIF must contain the designation "Limited Qualified Investor Fund" or "L-QIF" and the investors must be made aware of the L-QIF's nature on the first page of the fund documentation and in connection with advertisement that the L-QIF does neither have a FINMA license nor a FINMA approval and is not supervised by FINMA. For transparency reasons, all
L-QIF's shall be registered in a publicly accessible register, providing inter alia for information as to the management of the L-QIF. In case of omission of the warning references in the fund documentation or advertisement or in case of breach of the notification obligations towards the public register, the persons who set up and run the L-QIF may be fined with up to CHF 500'000.

The L-QIF may at any point in time be converted into a regulated collective investment scheme by applying for FINMA approval.

The new proposed L-QIF would certainly be supportive and strengthen Switzerland's attractiveness as fund centre, all the more because the proposed amendments to CISA would not deviate from international standards or European regulation whilst similar foreign products (such as the RAIF or NAIF) may be offered to qualified investors in Switzerland already today without FINMA approval. The L-QIF would be the Swiss equivalent to these foreign products, providing for certain advantages in terms of risk diversification or approval process.

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Topics: Banking & Finance

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Dr. Catrina Luchsinger Gähwiler

Catrina is a specialist in financial market law and corporate law. She has a wealth of experience advising financial market clients, including banks, asset managers and investment vehicles, as well as substantial operational knowledge. She also serves on the management boards of various com-panies, some of which are in the financial services sector. Catrina joined our firm as an associate in the year 2000. She became a partner in 2007. Catrina advises financial services clients and investment companies on regulatory issues as well as on contractual aspects relating to the financial market industry. She furthermore has considerable experience in acquisition and financing transactions, in general corporate work, both for listed and privately held companies, in mergers and acquisitions – predominantly in the financial services sector – and regularly advises in equity capital market transactions both for SIX Swiss Exchange, where she is admitted as a listing agent, and for BX Berne eXchange. Chambers Europe and Chambers Global have identified her as a Recognised Practitioner in the field of banking and finance, where clients have commended her client orientation. She is also ranked as a leading lawyer in the IFLR1000 guide for financial services regulatory and M&A. Catrina obtained her law degree from the University of Zurich in 1991 and was admitted to the Zur-ich Bar in 1995. She gained her PhD in 2004. Her working languages are German, English and French. She is a member of the Zurich Bar Association, the Swiss Bar Association, the International Bar Association (IBA) and the International Pacific Bar Association.

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Dr. Mark Montanari

Mark Montanari’s practice focuses on capital and financial markets, corporate law, start-ups as well as M&A and financing transactions. He regularly advises international and domestic clients in these fields, including public takeover and stock exchange laws and regulations. Mark Montanari joined our firm in 2010 and became counsel in 2017. Prior to that, he worked as a clerk at the District Court Emmental-Oberaargau and with a business law firm in Berne. Thereafter he worked as research and teaching assistant at the University of Berne (Institute of Business Law). After having graduated in law from the University of Berne in 2005, he was admitted to the Bar in 2008 and went on to complete a PhD (summa cum laude) in 2011 in the field of financial markets. His working languages are German and English. Mark Montanari is a member of the Zurich Bar Association, the Swiss Bar Association and the International Association of Young Lawyers (AIJA).

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