SWITZERLAND Law and Practice Contributed by: Nicolas Béguin, Joseph Merhai, Thomas Pasquier and Benjamin Vignieu, Aegis
safeguarded. In practice, Swiss and foreign AIFs are generally only available to qualified investors. Non-qualified investors are typically restricted from investing in AIFs, in order to minimise expo - sure to high-risk investment products. Swiss law imposes additional requirements when a fund is authorised for offering to non- qualified investors, such as the obligation to issue a KID or, for foreign AIFs, the requirement to be approved by FINMA (Article 120, para 1 CISA). In addition, foreign AIFs that are offered to non-qualified investors and/or qualified inves - tors that are high net worth retail clients (includ - ing the private investment structures created for them) must appoint a Swiss representative and paying agent (Article 120, para 4 CISA). 2.3.11 Approach of the Regulator In Switzerland, FINMA adopts a co-operative approach to regulation. In particular, FINMA requires all supervised persons and entities to fully co-operate by providing any information and documents necessary for FINMA to effec - tively perform its regulatory duties (Article 29, para 1 of the Financial Market Supervision Act of 22 June 2007 (FINMASA)). Supervised per - sons and entities must also report to FINMA any incident that is of substantial importance to the supervision (Article29, para 2 FINMASA). The authority is also open to discussing regulatory issues on an informal basis and issuing rulings to provide clarity and guidance on regulatory matters. 2.4 Operational Requirements Open-ended AIFs and SICAFs must appoint a custodian bank (Article 25, para 2 and Articles 44a and 114 CISA). Only a Swiss bank licensed under the Swiss Banking Act can be appointed in such capacity (Article 72, para 1 CISA). The custodian bank shall have an appropriate organi -
sational structure to act as custodian bank, and is notably responsible for the safekeeping of the investment fund’s assets, the issue and redemp - tion of units, and payment transfers on behalf of the AIF (Article 73 CISA). Unlike the other categories of funds, LPCIs are not required to use a custodian bank, given the nature of the investments made. However, LPCIs may use a custody service and a payment ser - vice, provided that the partnership agreement so provides (Article 102, para 1, lit j CISA). 2.5 Fund Finance Subject to specific regulatory restrictions, AIFs may take out loans and grant securities over the fund’s assets to support their investment strat - egies. The CISO prescribes leverage limits as a percentage of the fund’s net assets, varying based on the type of AIF. “Open-ended CIS for alternative investments” may: • raise loans for an amount of up to 50% of the fund’s net assets; • pledge or transfer as collateral no more than 100% of the fund’s net assets; • commit to an overall exposure of up to 600% of the fund’s net assets; and • engage in short-selling (Article 100, para 2 CISO). Please see 3.5 Fund Finance for the restrictions applicable to the other type of funds. The investment restrictions shall be set out explicitly in the fund regulations, which shall indicate the nature and scale of short-selling permitted (Article 100, para 3 CISO). LPCIs are not subject to any particular restric - tions on borrowing.
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