Distribution Rules to Accredited Investors

Swiss Collective Investment Act

01 Mar 2013 Distribution Rules to Accredited Investors

under the March 2013 Revision of the Swiss Collective Investment Act

 

C O M P A R I S O N  W I T H  F O R M E R  P U B L I C  O F F E R I N G  R E G I M E

Former Regime New Regime
Different Concepts, Wording and Definitions:

·Public Offering.

·Private Placement to Accredited Investors.

·Distribution to Accredited Investors

·Distribution to Retail Investors

·Private Placement

Accredited Investors Defined
Regulated Financial Intermediaries Regulated Financial Intermediaries subject to surveillance such as banks, securities dealers and fund management companies.
Insurance Companies Insurance Companies subject to surveillance.
Public Corporations, Pension Funds and Other Corporations Public  Corporations,  Pension  Funds  and  other  Corporations  with  professional treasury management.
High Net Worth Individuals High Net Worth Individuals on the condition that they own, directly or indirectly, net financial assets amounting to two million Swiss Francs (CHF 2,000,000) or more. Such Financial assets shall include bank deposits, fiduciary deposits, securities, derivatives, precious metals and redeemable life insurance policies. Financial assets  do not include real estate, social  benefits and pension money. In situations where the financial intermediary manages less than two million Swiss Francs (CHF 2,000,000) in financial assets, the investor is required to confirm, in writing, that his global net financial assets amount to at least two million Swiss Francs (CHF 2,000,000). In case of doubts, the offeror has the duty to verify the Individual’s financial condition.

High Net Worth Individuals on the condition that they confirm, in writing, that they want to be treated as Accredited Investors and who at the time of investment evidence that:

(i)   they own net financial assets in the amount of five hundred thousand Swiss Francs (CHF 500,000) or more and that they have experience in similar transactions as a result of their education/work or of having made an average of ten (10) transactions of a similar size per quarter during the last four (4) quarters. The information/evidence must be documented.

or

(ii)  they own assets in the amount of five million Swiss Francs (CHF 5,000,000) with a maximum of (CHF 2,000,000  in real estate.

Financial assets include bank deposits, fiduciary deposits, securities, derivatives, precious metals and redeemable life insurance policies, as well as asset pooling vehicles owning such assets. Financial assets do not include real estate, social benefits and pension money.

Asset Pooling Vehicles

Asset Pooling Vehicles to the extent that they hold a minimum net amount of two million Swiss Francs (CHF 2,000,000)in financial assets.

It is unclear whether a trust would fall into the definition of an Asset Pooling Vehicle.

Asset Pooling Vehicles are included in the definition of High Net Worth Individuals.

 

Self Regulated External Asset Managers and/or Managed Clients Self Regulated External Asset Managers and Managed Clients to the extent that they have entered into a discretionary management agreement and that (i) the asset manager is subject to the Swiss Anti-Money Laundering Act of  10 October 1997, (ii) the asset manager is governed by the Code of conduct enacted by a professional organization which is recognized by the regulator as minimum standard and (iii) the discretionary agreement meets the recognized standards enacted by a professional organization. Self Regulated External Asset Managers are no-longer considered as Accredited Investors.

 

Managed Clients to the extent that they have entered into a discretionary management agreement with a Regulated Financial Intermediary.

 

Retail Investors Defined
A Contrario All investors that are not Accredited Investors.
Public Offering / Distribution Defined
Public Offering Defined (same):                                                                                   Distribution Defined (same):

Any direct selling efforts undertaken in connection with the offering of collective
investments.The means, nature and form of a selling effort are irrelevant. Direct selling efforts include advertisements via newspapers or direct mail, dissemination of prospectuses, offering memoranda, term sheets, fact sheets, recommendation lists, solicitation made to banks and financial intermediaries to forward information to their clients, any kind of information that could have the effect of facilitating the subscription of units (including value numbers and subscription process), press releases, press conferences, telephone marketing, cold calls, road shows, investment exhibitions and seminars, sponsored reports, home visits, internet web sites with no access restrictions, e- commerce, application forms and e-mails.

Safe Harbor Rules and Exemptions to Public Offering/Distribution
Accreditor Investors Exemption There is no public offering where the selling efforts are only aimed at Accredited Investors. There is no distribution where the selling efforts are only aimed at Regulated Financial Intermediaries or Insurance Companies
Self-Solicitation Exemption There  is  no  public  offering  where  the investor (accredited or non-accredited) demands information and subscribes to fund units on his/her own initiative. There  is no distribution where:

Execution Only: the investor (accredited or non-accredited) demands information and subscribes to fund units on his/her own initiative.

Advisory: the units are being purchased based on a long-term written financial advisory contract (subject to an advisory fee) entered into with a Regulated Financial Intermediaries or with a Self- Regulated External Asset Manager (as defined herein).

Self Regulated External Asset Manager Exemption Self-Regulated External Asset Managers were considered as Accredited Investors, and thus form part of the Accredited Investors Exemption. There is no distribution where the units are being purchased by a Regulated Financial Intermediary or a Self Regulated External Asset Manager in the context of a discretionary management agreement and that (i) the asset manager is subject to the Swiss Anti- Money Laundering Act of 10 October 1997, (ii) the asset manager is governed by the Code of conduct enacted by a professional organization which is recognized by the regulator as minimum standard and (iii) the discretionary agreement meets the recognized standards enacted by a professional organization.
Tombstone advertisement Exemption Tombstone advertisement does not constitute public offering/distribution when it is restricted to information on price, net asset value and tax data published by financial intermediaries subject to surveillance, such as banks, securities dealers, fund management companies, representatives of foreign collective investments. Tombstone adverts shall not include any contact details.
Employee Participating Plan N/A There is no distribution where the company proposes to its employees to invest through a collective investment schemes in the company or an affiliated group company and:

(i) the employee is still employed at the time of the investment;
(ii) the investment is part of a salary package.

Limited Offering Exemption A limited offering to twenty (20) non- Accredited Investors did not constitute a public offering. This exemption has been dropped.
Regulatory Requirements
Public Offering/Distribution to Accredited Investors N/A Swiss Collective Investment Schemes:
No requirement.Foreign Collective Investment Schemes:
• No requirement if the marketing effort only targets Regulated Financial Intermediaries or Insurance Companies (e.g. remember this is not construed as distribution).• For other Accredited Investors, the Foreign Collective Investment Schemes do not need to be authorized by FINMA, but they must appoint a representative agent, a paying agent (e.g. a bank which will operate in Switzerland a subscription and redemption account), as well as licensed distributors, as the case may be. The representative agent will have to ensure that the name of the Fund is not misleading. The Fund’s offering documents used in or from Switzerland must indicate the contact details of the paying agent and the representative agent.
Public Offering/Distribution to Retail Investors The Fund must be approved/authorized by FINMA.

For Foreign Collective Investment Schemes, FINMA will authorize the Fund to the extent that:

• The Fund, its administrator, its custodian and its fund manager are regulated in their home jurisdiction;
• The Fund administrator and the custodian are based in a jurisdiction with similar prudential standards;
• The name of the fund is not misleading;
• The Fund must appoint a representative agent and a paying agent (e.g. a bank which will operate in Switzerland a subscription and redemption account), as well as licensed distributors as the case may be.
• FINMA must have entered into a cooperation agreement with the home jurisdiction of the Fund.

Specific Waivers N/A FINMA may waive the requirement to
seek a license by the representative
agent, the distributor or the fund
manager if they are subject to an
equivalent recognized regulatory license
in a foreign jurisdiction.
Grandfathering Deadlines
High Net Worth Individuals Two (2) years from 1st March 2013 to
opt-in.
Foreign Collective Investment Schemes distributed to Accredited Investors Two (2) years from 1st March 2013 to appoint a representative agent, a paying agent and a distributor, as the case may be, and to ensure that the name of the Fund is not misleading.
Foreign Collective Investment Schemes distributed to Retail Investors One (1) year from 1st March 2013 to comply with new provisions of the Revised CISA.

 

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