Private placement regulations in Switzerland

by R.A.U. Juchter van Bergen Quast

Introduction

Switzerland is not a Member State of the EU and is thus not subject to the AIFMD and the respective rules. Switzerland has its own rules: (1) the Financial Services Act (“FinSA”, Finanzdienstleistungsgesetz); (2) the corresponding ordinance (“FinSO”, Finanzdienstleistungsverordnung); (3) the Collective Investment Scheme Act (“CISA”, Kollektivanlagegesetz); (4) the corresponding ordinance (“CISO”, Kollektivanlageverordnung); and (5) terminology related to funds or collective investment schemes (“CIS”), meaning any type of fund, as well as related to the terms retail, professional, institutional and non-qualified and qualified investors.  

Collective investment schemes (CIS)

The statutory regulation on placements of CIS covers the product,  the distributor and the documentation. 

Product Level 

Distribution to the public (non-qualified / retail investors) requires that the foreign CIS is registered with the Swiss Financial Market Supervisory Authority (“FINMA”) – so called “passporting” – which involves the appointment of a Swiss representative and a Swiss paying agent.

Distribution to a limited group of qualified investors, namely high-net-worth retail clients and private investment structures created for them having declared an “opting out” (“Opting Out-HNWI”), requires the appointment of a Swiss representative and a Swiss paying agent, but no passporting.

Distribution to all other qualified investors is possible without passporting and without appointment as Swiss representative and paying agent.

Distributor Level

The marketing of CIS is considered a financial service pursuant to FinSA. Therefore, individuals or entities marketing CIS to Swiss investors have to respect the following duties:

  • register client advisers in a FINMA approved advisers’ register;
  • affiliate with an ombudsman’s office;
  • classify Investors according to Swiss law (i.e. retail clients, professional clients or institutional clients); 
  • comply with certain rules of conduct; and
  • comply with certain organizational requirements.  

There are certain exceptions from or facilitations to theses duties if CIS are marketed to professional or institutional clients only and there is also a reverse solicitation exception. 

Documentation Level

Any person making in Switzerland an offer to the public for securities (including CIS) must, as a rule, publish a prospectus. There are activities not considered to be an offer to the public, namely:

  • making available information at the request or initiative of the client, not preceded by advertising; 
  • merely mentioning financial instruments, as the case may be in conjunction with factual or general information (such as ISINs, net asset values, prices, risk information, price performance or tax figures); 
  • merely making available factual information; and
  • preparing and making available legally or contractually required information and documents on financial instruments to existing clients or financial intermediaries (such as corporate action information or invitations to general meetings).   

In addition, there are a number of explicit exceptions from the prospectus duty, inter alia, if the offer:

  • is addressed solely to investors classified as professional and/ or institutional clients;
  • is addressed to fewer than 500 investors;
  • is addressed to investors acquiring securities with a value of at least CHF 100,000;
  • has a minimum denomination per unit of CHF 100,000; or
  • does not exceed a total value of CHF 8 million over a 12-month period. 

Beyond the rules on prospectuses, a Key Investor Information Document (“KIID”) may be required and there are rules on advertising, in particular that advertising must be indicated as such.

Prospectuses and KIIDs approved under other legal frameworks, in particular the EU, may however be used in Switzerland provided that certain standards are met. 

Consequences of non-compliance with place-ment regimes for fund interests

Violations of the placement rules are subject to criminal penalties, the placement itself remaining however valid. Moreover, FINMA may act against private individuals or legal entities violating the placement rules and/ or acting without the required licence or registration and, for such purposes, initiate investigations, which could lead, for instance, to a seizure and foreclosure of illicit gains or the liquidation of the legal entity at issue. Eventually, the responsible persons may also become liable for damages which investors might suffer.