Patrick Schleiffer\/Michael Kremer (Reference: CapLaw-2015-17) <\/em>might be worth reading<\/p>\r\n\r\n <\/p>\r\n\r\n
1) Introduction<\/h2>\r\n\r\n
In parallel with the Alternative Investment Fund Directive (AIFMD) coming into force, Switzerland amended its fund marketing regime which entered into force on 1 March 2013. The implementation of the amended requirements for non-Swiss funds to be distributed to qualified investors in Switzerland was subject to a two-year transitional period which ended on 28 February 2015. As of 1 March 2015, the distribution of non-Swiss funds to so-called unregulated qualified investors requires the appointment of a Swiss representative and a Swiss paying agent. In addition, distributors have to enter into Swiss law governed distribution agreements with the Swiss representative of the respective non-Swiss fund before marketing the fund in Switzerland.<\/p>\r\n\r\n
2) Fund Marketing Regime for Qualified Investors<\/h2>\r\n\r\n
The revised Swiss fund marketing regime applicable to non-Swiss funds not approved by the Swiss Financial Market Supervisory Authority (FINMA) depends on the type of qualified investors that are being targeted in Switzerland. There are two different regimes that apply to the marketing of funds to qualified investors in Switzerland: the fund marketing regime applicable to the distribution of non-Swiss funds to regulated qualified investors on the one hand and the fund marketing regime applicable to the distribution of non-Swiss funds to unregulated qualified investors on the other hand. Under either regime, no approval, registration, or notification in Switzerland is required under the CISA. Absent any prior approval by FINMA or exemption available under the CISA, a non-Swiss fund may not be marketed to investors other than qualified investors within the meaning of the CISA. If the non-Swiss fund is structured as a company, the Swiss civil law prospectus rules may also apply if the distribution of the non-Swiss fund in Switzerland qualifies as a public offering for purposes of such prospectus rules. See CapLaw-2010-42 and CapLaw-2011-22.<\/p>\r\n\r\n
a) Fund Marketing Regime for Regulated Qualified Investors<\/h3>\r\n\r\n
There are no restrictions on the cross-border marketing of a non-Swiss fund to so-called regulated qualified investors which are entities that are prudentially supervised financial intermediaries (such as banks, securities dealers, fund management companies, asset managers of collective investment schemes, and central banks) and regulated insurance companies (Regulated Qualified Investors). The marketing of a non-Swiss fund exclusively to Regulated Qualified Investors falls outside the scope of the CISA and is, as such, not subject to specific marketing restrictions and requirements under the CISA. Thus, there is no requirement for a non-Swiss fund to appoint a Swiss representative and a Swiss paying agent, and no distribution agreements have to be entered into between the relevant Swiss representative and the distributors marketing the non-Swiss fund to Regulated Qualified Investors in Switzerland.<\/p>\r\n\r\n
b) Fund Marketing Regime for Unregulated Qualified Investors<\/h3>\r\n\r\n
Where a non-Swiss fund is marketed (also) to so-called unregulated qualified investors in Switzerland which include (i) public entities and pension funds with professional treasury management (professional treasury management requires that the relevant entity has entrusted at least one qualifi ed professional with the management of its asset on a permanent basis), (ii) enterprises with professional treasury management, (iii) high net worth individuals who have declared in writing that they wish to be deemed, qualified investors and who fulfi ll certain conditions such as minimum financial assets and technical competences (HNWIs), and (iv) investors who have entered into a discretionary asset management agreement with a regulated financial intermediary or an unregulated independent asset\/portfolio manager meeting the relevant requirements under the CISA, its implementing ordinance and guidelines (Independent Asset Manager), provided that they have not opted out in writing (Unregulated Qualifi ed Investors), a Swiss representative and a Swiss paying agent must be appointed, prior to any marketing activities in Switzerland, and distribution agreements have to be entered into between the relevant Swiss representative and each distributor marketing the non-Swiss fund in Switzerland.<\/p>\r\n\r\n
i. Appointment of Swiss Representative and Swiss Paying Agent<\/h3>\r\n\r\n
For each non-Swiss fund that is marketed (also) to Unregulated Qualified Investors in Switzerland, a Swiss representative and a Swiss paying agent must be appointed. Swiss banks may act both as representative agents (subject to proper licensing) and paying agents.<\/p>\r\n\r\n
The duties of the Swiss representative include representing the non-Swiss fund vis-\u00e0-vis Swiss-based investors and FINMA. Thus, the Swiss representative is responsible for answering any potential queries or claims raised by FINMA or investors in relation to the distribution of the non-Swiss funds in Switzerland. Also, the Swiss representative has to monitor the distribution activities of the appointed distributor(s) for Switzerland. The Swiss representative has to enter into a Swiss law governed distribution agreement with each distributor appointed to market the non-Swiss fund to Unregulated Qualified Investors in Switzerland.<\/p>\r\n\r\n
From a legal perspective, the purpose of appointing a Swiss bank as a Swiss paying agent is to enable Swiss investors to receive and make payments in relation to the units of the non-Swiss fund through a Swiss-based bank. However, in practice, payments are typically directly made with or received from the non-Swiss fund\u2019s custodian or transfer agent, and, accordingly, the Swiss paying agent does typically not play an active role when non-Swiss funds are marketed to Unregulated Qualified Investors.<\/p>\r\n\r\n
The Swiss Funds & Asset Management Association (SFAMA) has published a model representation agreement serving as a template for representation agreements.<\/p>\r\n\r\n
ii. Requirements applicable to non-Swiss based Distributors<\/h3>\r\n\r\n
A distributor based outside of Switzerland may not market non-Swiss funds to Unregulated Qualified Investors unless it is subject to appropriate supervision in its home jurisdiction. There is currently no further guidance on the interpretation of the Swiss concept of \u201cappropriate supervision\u201d. In the opinion of Patrick Schleiffer\/Michael Kremer (Reference: CapLaw-2015-17)<\/em>, also an SEC-registered investment manager or a MiFID licensed investment firm should, as a rule, be considered to be a non-Swiss distributor subject to appropriate foreign supervision and should therefore be permitted to distribute, on a pure cross-border basis, non-Swiss funds to Unregulated Qualified Investors in Switzerland.<\/p>\r\n\r\nDistributors (including non-Swiss-based distributors) have to enter into a written Swiss law governed distribution agreement with the relevant Swiss representative of the non-Swiss fund, prior to any marketing activities in Switzerland. This obligation also applies to any sponsor, fund manager, or asset\/investment manager of the non-Swiss fund or to the fund itself, provided they are also engaged in marketing the fund in Switzerland. Such agreements are typically based on the model distribution agreement issued by SFAMA. Distributors (including non-Swiss based distributors) must agree to exclusively use marketing documentation mentioning the Swiss representative, the Swiss paying agent as well as the place of jurisdiction and to comply with the SFAMA guidelines on the distribution of collective investment schemes (Distribution Guidelines) and the SFAMA guidelines on duties regarding the charging and use of fees and costs (Transparency Guidelines). Both the Distribution Guidelines and the Transparency Guidelines have been declared by FINMA as minimum standards to be complied with when marketing funds in Switzerland.<\/p>\r\n\r\n
iii. Documents to be used when marketing non-Swiss Funds in Switzerland<\/h3>\r\n\r\n
Non-Swiss funds to be distributed to Unregulated Qualified Investors must use in Switzerland fund documentation mentioning the Swiss representative, the Swiss paying agent, the place of jurisdiction, and the place where the relevant fund documents are available free of charge.<\/p>\r\n\r\n
In accordance with the Distribution Guidelines and the Transparency Guidelines, certain information on fees and costs as well as on retrocessions and rebates must be disclosed in the relevant fund documentation. Retrocessions refer to any commissions, kickbacks, trailer, or finder\u2019s fees that are paid by the fund to distributors. Rebates are payments by funds or their agent directly to investors resulting in a reduction of the fee or cost attributable to the fund. Rebates are permitted, provided that they are granted on the basis of objective criteria. The fund documents must also contain a statement if no retrocessions or rebates will be paid.<\/p>\r\n\r\n
In order to comply with the Transparency Guidelines and the regulatory information requirements, SFAMA recently prepared a model annex (Information for investors in Switzerland) serving as a template and covering the required information to be inserted into the fund documentation regarding the Swiss representative and Swiss paying agent, the place of performance and jurisdiction and payments of retrocessions and rebates.<\/p>\r\n\r\n
It is untested whether the place of jurisdiction has to be located (as a matter of mandatory Swiss law) at the registered office of the Swiss representative or another venue in Switzerland or whether it can be provided for to be elsewhere (e.g., at the place of the registered office of the fund). According to the view of Patrick Schleiffer\/Michael Kremer (Reference: CapLaw-2015-17)<\/em>, there is no sufficient legal basis for mandatory submission of the fund to the courts at the registered office of the Swiss representative or another venue in Switzerland. Thus, it should be permissible under the CISA to provide for a place of jurisdiction at the registered office of the fund, subject to mandatory Swiss conflict of law provisions.<\/p>\r\n\r\niv. Marketing Activities<\/h3>\r\n\r\n
Under the CISA, any form of marketing activities, whether in writing or orally, occurring on a pure cross-border basis or by representatives of the sponsor, fund manager and any other persons involved in the marketing of the fund physically present in Switzerland (e.g., roadshows, investor presentations, term sheets, private placement memorandums, granting access to a virtual data room, draft subscription agreement), which is aimed at marketing a specific fund to Unregulated Qualified Investors constitutes distribution under the CISA and thus triggers the obligation to appoint a Swiss representative and a Swiss paying agent and to enter into distribution agreements prior to marketing activities being conducted in Switzerland.<\/p>\r\n\r\n
Conversely, presentations that solely describe the sponsor or the fund or asset\/investment manager\u2019s business, services, experience, and investment strategy in general and which do not reference a specific fund to be marketed should in the eyes of Patrick Schleiffer\/Michael Kremer (Reference: CapLaw-2015-17) <\/em>not be considered to constitute a distribution within the meaning of the CISA. Further, the testing of the market for a contemplated future fund should according to them not constitute distribution unless the principle terms are already specified so that the fund can be regarded as ready to be marketed in Switzerland. Also, references to existing funds that are, at such time, no longer open\/distributed to investors in Switzerland should not be regarded as a distribution under the CISA.<\/p>\r\n\r\nv. Exemptions<\/h3>\r\n\r\n
There are three main exemptions from the revised fund marketing regime that non-Swiss funds and non-Swiss based distributors may rely on when distributing a fund in Switzerland:<\/p>\r\n\r\n
Unsolicited request\/reverse solicitation exemption: The provision of information and marketing material and the marketing of a non-Swiss fund occurring at the instigation\/own initiative of the investor in Switzerland do not constitute distribution of such fund to Unregulated Qualified Investors in Switzerland. However, such reverse solicitation is limited to situations where an investor requires information on or acquires units of a specific fund without preliminary intervention or contact from the sponsor, fund, fund manager, distributor(s), or the Swiss representative. Though through its' nature SMARTMONEYMATCH should fulfill this condition for reverse solicitation and for Switzerland we only allow regulated qualified investors to qualify - at registration - as qualified investors, we still require for offering for qualified investors in Switzerland a Swiss representative agent and paying agent according to the Terms & Conditions point 5.c.X.
\r\nDiscretionary asset management agreement exemption: The provision of information and marketing material and the marketing of a non-Swiss fund occurring in the context of a written discretionary asset management agreement entered into by the investor with a regulated financial intermediary (such as a bank or an asset manager of collective investment schemes) do not constitute distribution under the CISA.
\r\nAdvisory agreement exemption: The provision of information and marketing material and the marketing of a non-Swiss fund occurring in the context of a written advisory agreement which complies with the requirements of the CISA, its implementing ordinance and guidelines, entered into by the investor with a regulated financial intermediary is not regarded as distribution under the CISA.
\r\nWhile the discretionary asset management agreement exemption and the advisory agreement exemption is also applicable in the context of a written discretionary asset management agreement or a written advisory agreement entered into between an (unregulated) Independent Asset Manager and its clients, FINMA currently only considers the provision of information and the marketing of a non-Swiss fund by the (unregulated) Independent Asset Manager to its clients (but not any preceding or concurrent marketing activities of the distributors towards the (unregulated) Independent Asset Manager) as exempt from the fund marketing regime for Unregulated Qualified Investors. Thus, in the context of the discretionary asset management agreement exemption and the advisory agreement exemption and in order to completely stay outside the scope of the revised fund marketing regime, non-Swiss funds may only be marketed to regulated financial intermediaries (such as a bank or an asset manager of collective investment schemes) and by them to their clients (which do not have to be Regulated Qualified Investors) with whom the relevant regulated financial intermediary maintains a discretionary asset management agreement or an advisory agreement meeting the requirements of the CISA, provided that the marketing of the fund to such clients is made through the relevant regulated financial intermediary itself (and not by the distributors of the fund directly).<\/p>\r\n\r\n
vi. Transitional Period<\/h3>\r\n\r\n
The two-year transitional period applicable to the amended rules for the marketing of non-Swiss funds to Unregulated Qualified Investors in Switzerland under the CISA ended on 28 February 2015. As from 1 March 2015, a Swiss representative and a Swiss paying agent must be appointed, and Swiss law governed distribution agreements between the Swiss representative and the entities distributing the relevant non-Swiss fund in Switzerland must be entered into, prior to marketing such fund to Unregulated Qualified Investors in Switzerland.<\/p>\r\n\r\n
It is untested whether a fund has to appoint a Swiss representative and a Swiss paying agent also in case that the fund was marketed to Unregulated Qualified Investors in Switzerland during the transitional period but not after 28 February 2015. According to Patrick Schleiffer\/Michael Kremer (Reference: CapLaw-2015-17)<\/em>, in such a situation, no Swiss representative and no Swiss paying agent has to be appointed retrospectively, as there was no distribution (triggering the obligation to appoint a Swiss representative and Swiss paying agent and to enter into distribution agreements) after 28 February 2015.<\/p>\r\n\r\nvii. Termination of the Agreements of the Swiss representative, Swiss Paying Agent, and Distributor following Distribution?<\/h3>\r\n\r\n
The revised marketing rules are silent as to whether the agreements with the Swiss representative, the Swiss paying agent and the distributors must also be maintained, if, e.g., a closed-end fund is marketed only one time in Switzerland. <\/p>