Swiss Financial Market Supervisory Authority (FINMA) said on 23 February that its government will launch a new category of investment fund which will be exempt from regulation.
The Limited Qualified Investor Fund (L-QIF), a new fund category without approval and supervision from FINMA will go live on 1 March 1, 2024, as agreed by the Swiss Parliament and implemented by the Federal Council.
The L-QIF is neither approved nor monitored by FINMA. At the same time, the Federal Council is adapting the Collective Investment Schemes Ordinance (KKV) – particularly in the area of liquidity management – and other regulations.
In December 2021, the Swiss Parliament decided to introduce the L-QIF as a new fund category and adapted the Collective Investment Schemes Act (KAG) accordingly.
L-QIF are collective investment schemes that neither require approval or authorization from FINMA nor are they supervised by FINMA. The condition for this is that they are only open to qualified investors and are managed by institutions supervised by FINMA.
The institutions that manage L-QIF are themselves responsible for complying with the regulations applicable to the L-QIF.
For transparency reasons, the fund must be referred to as “Limited Qualified Investor Fund” or “L-QIF” on the first page of the fund documents and in advertising.
There is also no requirement for approval and authorisation as well as the lack of supervision by FINMA. The Federal Department of Finance (FDF) will keep a public register of all L-QIFs.
FINMA further sadi that it is neither responsible for questions of interpretation regarding an L-QIF nor for issuing L-QIF-specific regulations.
The Collective Investment Schemes Act (KAG) and the Collective Investment Schemes Ordinance (KKV) have also been adapted in other areas in order to implement international standards, take market developments into account and increase legal certainty.
In particular, the legislature creates a legal basis for domestic exchange traded funds (ETFs), including new disclosure requirements.
In accordance with international standards, the resilience of collective capital investments will also be strengthened by means of more extensive liquidity regulations by introducing an obligation to ensure liquidity of the collective capital investment that is appropriate to the investments, investment policy, risk distribution, investor group and redemption frequency.
In addition, further requirements regarding liquidity management when managing collective investment schemes were included in the KKV. The creation of side pockets also has a legal basis. This involves the segregation of individual investments that have become illiquid in an open collective investment scheme.
Another provision specifies the necessary procedural and notification obligations in the event of an active violation of investment regulations.
The new provisions in the KAG and the KKV come into force on March 1, 2024. They will apply to new collective investment schemes from this point onwards.
For collective capital investments that have already been approved or approved, however, two-year transition periods apply in individual areas, for example in the case of new disclosure and labeling obligations in the context of securities lending and repurchase agreements as well as in the case of Swiss ETFs.
The requirements in the area of liquidity must also be met with regard to existing collective investment schemes within two years of the changes coming into force.
However, new collective investment schemes (including L-QIF) must comply with the regulations from the time they are established.