Asset managers of collective investment schemes

Swiss based collective investment schemes are usually managed by an asset manager. The respective person needs to obtain an authorization from the Swiss Financial Market Supervisory Authority (FINMA), but there are certain exceptions to this requirement. If any changes occur in the circumstances of asset managers, FINMA’s prior approval of these changes must be obtained. Likewise, the intention of ceasing asset management for collective investment schemes must also obtain FINMA’s approval.

Fund managers are allowed to delegate certain activities and investment decisions when this decision is appropriate. Decisions regarding investments may be delegated to asset managers of collective investment schemes. The asset managers are a subject of a recognized supervisory regime established through FINMA’s regulatory framework.

Authorization requirements for asset managers of collective investment schemes

For asset managers, there are general requirements of authorization established in the Article 14 of the Collective Investment Schemes Act (CISA), which include the following:

1. The person responsible with the asset management must have a good reputation, have the necessary specialist qualifications and guarantee proper management of funds.
2. The significant equity holders in the collective investment scheme must have a good reputation and conduct a prudent and sound business practice.
3. Compliance with the asset managers’ duties stemming from the CISA is ensured by internal regulations and by having an appropriate business structure.
4. Sufficient financial guarantees must be available.
5. Asset managers must meet additional authorization requirements listed in the relevant provisions of the CISA.

Asset managers of collective investment schemes must also meet the requirements of Article 18 of the CISA and Article 19 of the Collective Investment Schemes Ordinance (CISO):

1. The company must be organized as a legal entity having the business structure of a limited company, general partnership, a partnership limited by shares or a limited partnership, a branch of a foreign asset manager of collective investment schemes or a limited liability company recognized under Swiss law – Swiss AG, Swiss GmbH or Kommandit-AG.
2. The company’s organization must be appropriate to its role.
3. The company must have the required minimum capital and provide financial guarantees.
4. The articles of association, the partnership agreement or the company’s organizational rules must include a geographically and factually accurate description of its operations.
5. At least one collective investment scheme must be managed by the company, as defined by the Article 7 of CISA.

Asset managers that don’t require authorization from FINMA, according to Article 2 of CISA are those who meet certain requirements.

Exceptions of authorization requirements for asset managers of collective investment schemes

Asset managers that are managing foreign collective investment schemes with investors deemed as qualified are exempt from FINMA’s authorization requirements. Asset managers must meet the following criteria:

1. The managed assets, including those acquired through the use of leveraged finance don’t exceed 100 million CHF.
2. The managed assets consist of non-leveraged collective investment schemes in which investors are not allowed to exercise redemption rights for at least 5 years after the first investment in the collective investment scheme was made and don’t exceed 500 million CHF.
3. Investors are group companies from the group of companies to which the asset manager belongs to.

These asset managers can opt for supervision under the CISA if this is a requirement of the country’s legislation where the collective investment scheme is established or distributed.

Delegation of investment decisions for Swiss collective investment schemes is allowed for asset managers who are subject to recognized supervision under CISA.

The role of asset managers of collective investment schemes

Asset managers mainly provide risk management and portfolio services to one or more collective investment schemes. In some case, they can also perform administrative tasks.

Changes in circumstances of asset managers of collective investment schemes

If any alteration to the basis on which authorization was originally granted from FINMA occurs, permission must be obtained from the supervisory authority before resuming business operations.

Cessation of and activity for which FINMA license is required

Any intention to cease the asset management operation for collective investment schemes must be prior approved by FINMA. The regulatory auditor must also give their opinion on the intended action and consequences derived from it.

For more information regarding asset managers of collective investment schemes, don’t hesitate to contact us and have one of our experts assist you in this matter.