The Swiss parliament and the Federal Council will launch a new type of capital exempt from approval on March 1, 2024.
The Swiss parliament voted to introduce a new category of mutual funds, the Limited Qualified Investor Fund (L-QIF), in December 2021 and amended the Collective Investment Schemes Act (CISA) accordingly. The Federal Council will now put these changes into effect on March 1, 2024.
L-QIFs are collective investment schemes that do not require FINMA authorization or approval and are not supervised by FINMA. To be eligible, these funds must be offered exclusively to qualified investors and managed by entities supervised by FINMA.
Institutions managing L-QIFs are themselves responsible for compliance with the L-QIF rules.
To ensure transparency, the fund must be designated on the front page of the fund’s documents and in advertising as a Limited Qualified Investor Fund or L-QIF. The fund’s exemption from licensing, approval and supervision by FINMA must also be made clear to investors.
The Federal Ministry of Finance (FDF) will maintain a public register of all L-QIFs. FINMA is not responsible for questions of interpretation in relation to an L-QIF or for issuing L-QIF-specific rules.
The Collective Investment Schemes Act (CISA) and the Collective Investment Schemes Ordinance (CISO) have also been amended in other areas to implement international standards, keep abreast of market developments and increase legal certainty.
In particular, the revised legislation creates a legal basis for domestic exchange-traded funds (ETFs), including new disclosure requirements. In line with international standards, it also makes collective investment schemes more resilient by introducing additional liquidity regulations. These are designed to ensure that a collective investment scheme’s liquidity position is appropriate for its asset class, investment policy, risk diversification, investor type and redemption frequency. Further liquidity requirements when managing collective investment schemes will also be added to the CISO.
The creation of “side pockets” is put on an institutional basis. This involves separating individual assets into an open-ended collective investment program that have become illiquid. Another provision sets out the required process and notification requirements in the event of an active breach of a scheme’s investment rules.
The new CISA and CISO provisions come into force on 1 March 2024 and will apply to new collective investment schemes from that date. However, in some areas two-year transitional periods will apply to collective investment schemes that have already been approved or approved, for example in relation to the new disclosure requirements for securities lending and repurchase transactions and Swiss ETFs.
Liquidity requirements must also be met by existing collective investment schemes within two years of the changes coming into force, while new collective investment schemes (including L-QIFs) will have to meet the rules from their inception date.