FinSA/FinIA: What needs to be done? And when? Practical

26 February 2020

FinSA/FinIA: What needs to be done? And when? Practical insights for the transition

1. Overview Hot TopicsDr. Alexander Vogel

2. Transistion Periods for Portfolio ManagersDr. Reto Luthiger

3. Transition Regime and Interface FinSA/FinIA and Funds Regulations Stephanie Comtesse

4. Transition into the new Prospectus and Key Information Document RegimeDr. Wolfgang Müller | Ülkü Cibik

Transition Regime and Interface FinSA/FinIA and Funds RegulationsStephanie Comtesse

1. Main Impact of FinSA/FinIA on Fund Regulations2. No more Distribution: Qualification of Marketing a Fund now?3. Client Segmentation4. Qualified Investors5. Important Transitional Provisions6. Implementation Timeline7. Marketing of Funds in Switzerland – Very Frequently Asked Questions8. Case Study

FinSA/ FinIA: What needs to be done? And when? Practical insights for the transition

Meyerlustenberger Lachenal AG, Attorneys at Law www.mll-legal.com │ www.mll-news.com

IntroductionMain Impact of FinSA/FinIA on Fund Regulations

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MAIN CHANGES

QI newly defined

Client advisor/register

Ombudsman for FS

Nodistribution/distributor

License for managers of “collective

assets”

No Rep + P.A. for QIs

Meyerlustenberger Lachenal AG, Attorneys at Law


www.mll-legal.com │ www.mll-news.com

No more Distribution: Qualification of Marketing a Fund now?1. Financial Service?

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Activities for (end) clients 1. acquisition or disposal FS2. receipt/transmission FS3. portfolio management4. investment advice5. loans to finance transactions with FS

FinSA Art. 3 lit. c

“…any activity addressed directly at certain clients that

is specifically aimed at the acquisition or disposal of a

financial instrument.”

FinSO Art. 3 Para. 2

Financial Service Consequences:− Registration as client advisor/Affiliation ombudsman− Conduct and organisational rules− Client segmentation




No more Distribution: Qualification of Marketing a Fund now?2. Offer?

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“an offer is any invitation to acquire a financial instrument that contains sufficient information on the terms of the offer and the financial instrument itself;”

FinSA Art. 3 lit. g

“An offer within the meaning of Article 3 letter g FinSA exists if a communication of any kind is made which:a. contains sufficient information on the terms of the offer and the financial instrument; andb. is customarily intended to draw attention to a certain financial instrument and to sell it.”

FinSO Art. 3 Para. 5

Offer Consequences:− Documentation obligations− Foreign fund retail clients: appointment of rep and paying agent + FINMA approval− HNWI only: Rep + paying agent (after transitional period)




Client SegmentationOptions for Clients

Institutionalclients(FinSA)

Qualifiedinvestors

(CISA)

Professional clients(FinSA)

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Retail clients




Qualified Investors34

Regulated financial intermediaries Insurance companies Foreign prudentially supervised

clients Central banks Supranational and national public

law entities with professional treasury

Institutional QI Professional QI

Public entities, pension fundsand other pension schemes with professional treasury Companies with professional treasury Large companies (2 of 3 conditions): Balance sheet CHF 20 mio Turnover CHF 40 mio Equity CHF 20 mio High net worth individuals with opt-out

(assets reduced to 2 mio) Private investment structures with

professional treasury

Clients with discretionary AM or advisory agreement

FinSA

FinSA + CISA FinSA

CISA




35Important Transitional Provisions

Art. 103 FinSO

Art. 104 FinSO

Art. 105 FinSO

Art. 106 FinSO

Art. 74 FinIA

[…..]Art. 95

FinSA/ Art. 107, 108 FinSO

Client Segmentation

Client advisors

knowledge

Organisationalmeasures […..]

managers of pension

scheme assets

Conduct rules, Rep/P.A.,

distr. agreements, SFAMA selfregulation

Client advisorsregistration,

ombudsman, etc.



Implementation Timeline

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1.1.2020 HY 1.1.2021 HY 1.1.2022 HY 1.1.2023

FinSAFinIA

CISA lCISA ll

+?1 3 2

4

5

6

7

1 New qualification as QI

2 -Client advisor registration-Affiliation ombudsman

3 Notification of AM of pension schemes

4 Prolongation of current CISA provisionsuntil FinSA compliant:-Rep + P.A. for non-regulated QIs-Distribution agreement with 3rd parties

5-New client segmentation-New client advisor knowledge

6 Rep + P.A.:-HNWI with opt-out (the only QI)-foreign funds for non-QI

7 Application as manager of collective assets for managers of pension schemes



Marketing of funds in SwitzerlandVery Frequently Asked Questions

1. What changes?

2. Who can I market− foreign UCITS funds (FINMA approved),

− foreign alternative funds (not approved or authorised), or

− Swiss funds to?

3. Which actions are to be taken?− regulatory measures (registrations, notifications, affiliations)

− contractual measures (Swiss representative, paying agent, placement agent/ex-distributor)

− internal processes (conduct and organisational rules)

− fund documentation updates/Swiss finish

4. When?

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Client 1: UK Manager with old Distributor License andphysical Presence in Switzerland Markets UCITS and AIFs in Switzerland

Markets UK managed accounts in Switzerland

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I hear we can terminate the Representation and Paying

Agent Agreement! How do wedo this quickly?

Do we still need to have special information in our

marketing documentation?

So now, we are fullyunregulated, just a normal

Swiss company, right?

We do not need a Swissombudsman, please confirm?



Client 2: US Alternative Manager with no physical Presence in Switzerland

Cross-border marketing of FINMA approved UCITS

AIFs marketed to QIs

Prospects include family offices and HNWIs

Currently manages monies for Swiss pension funds from abroad

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How do the new rules impact us? What about reverse solicitation exemption?

How does the pension fund qualify under the new rules? We do not

want all the appropriateness/ suitability review obligations…

When can investors start opting-out?



Client 3: European Group Company in Switzerland with Representative and Asset Manager License

Act as Swiss representative for their own UCITS and AIFs

Manages the AIF from Switzerland

Markets the entire range of funds in Switzerland

Manages individual portfolios for clients in Switzerland

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How can we simplify the reporting obligations in Switzerland particularly

regarding the licenses?

What new obligations would be triggered by making changes to the

structure?

What would our timeframe be?

Documents

FinSA/FinIA: What needs to be done? And when? Practical