SFA makes its case for rule changes

The Swiss Funds Association (SFA) has submitted proposals it says should help safeguard the competitiveness of the jurisdiction as an asset management location.

The proposals were submitted in light of ongoing revisions suggested for the Swiss Federal Act on Collective Investment Schemes (CISA), specifically that the regulations need to “close gaps” and that CISA overall needs to be brought in line with the AIFM Directive.

However, the SFA has added proposals regarding taxation, which it feels should be part of any overall revision in light of the need to maintain competitiveness.
CISA will for the first time bring all collective investments under the oversight of local regulator FINMA. It should also facilitate the opening of branch offices in Switzerland of foreign asset managers.

Other key areas the SFA addresses in its own proposals affect custody and distribution.

“As regards custody, the proposed shift in the burden of proof in the case of the liability of the custodian bank for custody by sub-custodians abroad will likely be necessary for Swiss regulations to be recognized by the EU,” the SFA states.

“The Federal Council’s proposals in this regard will also improve investor protection, and the SFA considers them sensible. However, the standpoint of the custodian banks also has to be taken into account here.”

“As regards distribution, although the SFA accepts replacing the term “public advertising” with “distribution”, it proposes adding certain necessary details to prevent misunderstandings and undesired results. Certain minimum requirements for the distribution of foreign collective investments schemes to qualified investors also make sense. However, in this regard the SFA is against the proposal that the newly created representative should “at all times” monitor the equivalence of asset management, custody and investor protection at the domicile of the collective investment scheme concerned.”

The SFA adds that bringing local jurisdiction in line with EU rules by itself is not enough. It goes on to suggest that “The SFA therefore proposes moderate but effective changes to the law in the following areas: SICAVs, the definition of collective investment schemes (minimum number of investors/external management/single-investor funds), real estate funds and SICAVs, as well as Swiss limited partnerships for collective investment.”

“Unfortunately the explanatory report contains no provisions on the tax treatment of Swiss collective investment schemes. However, addressing this issue is also essential in the SFA’s opinion. The fiscal framework is increasingly becoming a key factor for Switzerland as a location for fund production, in particular versus competing European production locations. The SFA has therefore proposed improvements as regards taxation in respect of restructuring, real estate, and withholding tax.”

SFA president Martin Thommen said: “We want to have the most attractive environment possible for the further development of Switzerland as an asset management location. In light of the time pressure involved, the SFA welcomes the rapid action of the Federal Council, but cautions against exaggerations and unnecessary protectionism,”

A detailed statement is available from the association’s website www.sfa.ch.

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Jonathan Boyd
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