The Swiss Federal Banking Commission (SFBC) has summarized its practice regarding the advertisement of investment funds in a recent circular, which also contains regulations on the distribution of funds via the Internet.

The regulatory framework applicable to the distribution of foreign funds is significant since the majority of funds can only be sold in or from Switzerland with the authorization of the SFBC.

On January 1 2001 a new Article 1(a) was added to the ordinance which implements the Swiss Investment Fund Act. It states that the offer and distribution of shares of investment funds qualifies as 'professional' if it involves a "public solicitation". In such cases SFBC authorization is required.

Following the issue of this ordinance, the SFBC expressed the view that 'public solicitation' means a solicitation made to more than 20 investors. However, several other issues remained unclear. The purpose of the recent circular was therefore to codify SFBC practice and to provide clarification on the remaining grey areas.

The circular confirms the 20-investor threshold, while clarifying that it does not matter whether the investors are contacted simultaneously or one after another, nor in what kind of timeframe. The question of whether the solicitation was successful or not is also irrelevant.

The draft extends the possibility of obtaining an exemption from the obligation to obtain SFBC authorization. This exemption is possible if a qualified relationship exists between the investor and the entity which offers or distributes the investment funds. The exemption is granted in the case of:

  • distributions of foreign funds to institutional investors whose assets are managed professionally, where the distribution is effected using advertising tools that are commonly used in the institutional investors market (eg, personal contacts and road shows);

  • asset management services provided by investment funds run by banks, security dealers and independent asset managers; and

  • asset management advisory activity provided by investment funds run by banks or security dealers.

With regard to the final two cases above, the circular requires that a written agreement be signed between the investor and the asset manager or the adviser. In the case of advisory activity, the net asset value of the securities held by the investor must exceed Sfr5 million.

The circular also regulates for the first time the distribution of investment funds via the Internet. Use of the Internet is considered to be a public solicitation, and therefore only authorized investment funds may be advertised on websites accessed in or from Switzerland. However, a website offering unauthorized funds is not considered to constitute a public solicitation if it includes a disclaimer or an access restriction. A general disclaimer which does not explicitly state that the funds offered on the website cannot be distributed in Switzerland is not sufficient.

For further information on this topic please contact Guy-Philippe Rubeli at Pestalozzi Lachenal Patry by telephone (+41 22 80 94 500) or by fax (+41 22 80 94 501) or by email ([email protected]).