Introduction
Background and objectives
Self-regulation
Form and content
Comment
Introduction
On June 29 2011 the Federal Council adopted an amendment to the Ordinance on Collective Investment Schemes in order to introduce the key investor information document (KIID).
The amendment entered into force on July 15 2011 and established the regulatory basis for the introduction of the KIID applying to foreign undertakings for collective investment in transferable securities (UCITS), non-UCITS and most Swiss retail funds, thereby replacing the previous simplified prospectus.
According to the ordinance, existing securities funds, other funds for traditional investments and foreign collective investment schemes deemed to be securities funds or which are comparable to other funds for traditional investment must publish a KIID that complies with Annex III of the ordinance within three years of the ordinance amendment coming into force (ie, mid-July 2014). A simplified prospectus may be maintained only until that date.
Fund managers, SICAVs (a type of open-ended investment fund in which the amount of capital in the fund varies according to the number of investors) or representatives of the above-mentioned funds which can be approved within one year of the amendment's entry into force may still publish a simplified prospectus pursuant to previous law. This implies that for foreign UCITS and non-UCITS, it will be mandatory to publish a KIID from mid-July 2012 onwards.
Background and objectives
The introduction of the KIID was required under EU law. Current adjustments to relevant Swiss provisions are based on the EU UCITS IV Directive (2009/65/EC) on the coordination of laws and regulations and administrative provisions relating to undertakings for collective investment schemes in transferable securities. The directive has been mandatory in EU member states for all UCITS newly approved since July 1 2011.
A KIID must:
- be a concise, standalone document containing the essential characteristics of the fund;
- use clear, understandable language; and
- be presented in a standardised format.
Its implementation in Swiss funds legislation aims to strengthen investor protection and facilitate fund distribution in Switzerland.
Self-regulation
The Swiss Funds Association issued a guide (the KIID Directive) containing essential information for investors regarding securities funds and other traditional investment funds in the form of retail funds.
The guide aimed to clarify technical implementation issues based on the underlying detailed provisions of EU supervisory authorities (discussed below).
The association submitted its KIID Directive to the Financial Markets Authority on August 15 2011 – to be recognised in application of Article 7(3) of the Financial Market Supervision Act as a minimum standard of self-regulation.(1)
On December 21 2011 the Financial Markets Authority's board of directors recognised the above-mentioned directive as a minimum standard of self-regulation; it came into force on February 1 2012.
In addition to this directive, the association published a list of frequently asked questions, which focused mainly on practical questions that may arise within the framework of Swiss funds.(2)
Form and content
The material requirements for a KIID are set out in Annex III to the amended ordinance.
A KIID must provide an overview of the main aspects of a collective investment scheme and must enable comparison between different collective investment schemes.
It must further include the new synthetic risk and reward indicator (rated one to seven, depending on risk and potential return characteristics).
The association has divided its KIID guide into five parts as follows:
- clear language and layout;
- template;
- methodology for calculation of the synthetic risk and reward indicator;
- methodology for calculation of ongoing charges; and
- rules relative to the selection and presentation of performance scenarios for structured UCITS.
In contrast to a simplified prospectus, a KIID must contain performance data, which necessitates regular updating. Further, all data – as well as KIIDs themselves – must be archived.
Comment
These increased requirements will – compared to the simplified prospectus – lead to a more complex procedure regarding the introduction and maintenance of KIIDs.
For further information on this topic please contact Mark-Oliver Baumgarten or Simon Urbach at Staiger, Schwald & Partner by telephone (+41 58 387 80 00), fax (+41 58 387 80 99) or email ([email protected] or [email protected]). The Staiger, Schwald & Partner website can be accessed at www.ssplaw.ch.
Endnotes
(1) According to Circular 2008/10 on self-regulation as a minimum standard.
(2) Both documents are available at www.sfa.ch.