Saturday, April 27, 2013

Consultation Paper by Swiss Regulator on Circular "Distribution of collective investment schemes"

The Swiss Financial Market Supervisory Authority "FINMA" is fully revising FINMA Circular 2008/8 on "Public advertising – collective investment schemes" and is opening a consultation to this purpose. The new Circular will now be entitled "Distribution of collective investment schemes" and will take account of the revised Collective Investment Schemes Act (CISA) and the Collective Investment Schemes Ordinance (CISO) that came into force on 1 March 2013. The consultation will run until 3 June 2013.

In its current circular (FINMA-Circ. 2008/8), FINMA defines the term "public advertising" and sets out what cases qualify as public advertising when offering or distributing collective investment schemes in or from Switzerland.

In the revised Collective Investment Schemes Act (CISA) and the Collective Investment Schemes Ordinance (CISO) that came into force on 1 March 2013, the term "public advertising" has been removed and replaced by the term "distribution". Therefore, since one of the key criteria, i.e. the term "public" is no longer relevant following the revision of the CISA and CISO, it is necessary to fully revise the current circular. The new Circular will replace FINMA Circular 2008/8.

The new Circular will implement the changes made to the revised CISA and CISO with respect to the distribution of collective investment schemes. In particular, it will define the term "distribution" and explain what activities qualify as distribution, as well as setting out the legal consequences entailed.

Key Points

  1. In the partly revised Collective Investment Schemes Act (CISA) and the Collective Investment Schemes Ordinance (CISO) that came into force on 1 March 2013, the term ‘public advertising’ has been replaced by the broader term ‘distribution’ (Art. 3 CISA; Art. 3 CISO).
  2. Following the revision of the CISA and the CISO, there is no longer a distinction made between ‘public’ and ‘non-public’ advertising. It is therefore necessary to fully revise FINMA Circular 2008/8 ‘Public advertising – collective investment schemes’.
  3. Within the meaning of Article 3 CISA, any form of offering and advertising collective investment schemes is, in principle, considered as distribution of collective investment schemes where (i) it is not directed exclusively at investors under Article 10 para 3 lets a and b CISA and (ii) it is not in- cluded in the exemption clause under Article 3 para. 2 CISA.
  4. The term ‘distribution’ within the meaning of Article 3 para. 1 CISA in particular excludes offering and advertising collective investment schemes that are aimed solely at qualified investors as prescribed in Article 10 para. 3 let. a (supervised financial intermediaries) and let. b (supervised insurance companies). Other exceptions include execution-only transactions and asset management advisory services.
  5. The purpose of the revised circular is to define the term ‘distribution of collective investment schemes’ and explain what activities qualify as distribution. Moreover, the legal consequences entailed where a certain activity qualifies as distribution are set out.

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