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Mark Montanari
Catrina Luchsinger Gähwiler
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.
According 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.
