Fund management regulation

Regulatory framework and authorities

How is fund management regulated in your jurisdiction? Which authorities have primary responsibility for regulating funds, fund managers and those marketing funds?

Fund management is primarily regulated through Swedish legislation. There are currently, in very broad terms, two types of Swedish funds that are recognised as such under Swedish law: undertakings for collective investment in transferable securities (UCITS) and alternative investment funds (AIFs). AIFs include all funds that are not UCITS funds (such as private equity funds) and Swedish special funds (such as hedge funds). Swedish UCITS are regulated by the Securities Funds Act (SFA) implementing, inter alia, Directive 2009/65/EC (the UCITS IV Directive) and AIFs are regulated by the Alternative Investment Fund Managers Act (AIFMA) implementing Directive 2011/61/EU (AIFMD) although it is mainly the managers of AIFs that are regulated. The Swedish Financial Supervisory Authority (SFSA) acts as the competent regulator responsible for ongoing supervision of funds and fund managers and for the issuance of supplementary regulations and formal guidance to the aforementioned acts. The SFSA is responsible for ensuring that the business of fund managers is carried out in accordance with applicable laws and regulations. The Securities Markets Act (SMA) implementing, inter alia, Directive 2014/65/EU (MiFID II) and the SFSA’s supplementing regulations further regulate the use of intermediaries and services ancillary to fund management.

All marketing activities that have the purpose of furthering the sale of any product in Sweden, including funds, are subject to the Marketing Practices Act, which requires, for example, that marketing is carried out in accordance with generally accepted marketing practices. The Swedish Investment Fund Association (SIFA) has issued guidance as regards, inter alia, the marketing of funds, which is considered as codifying generally accepted marketing practices. The Swedish Consumer Agency, which includes the Consumer Ombudsman, is the primary authority responsible for ensuring that marketing material is in compliance with the Marketing Practices Act.

Fund administration

Is fund administration regulated in your jurisdiction?

Fund administration services are generally unregulated, but there are certain administrative services, for example custodial services, that may only be provided under the prerequisite of a regulatory licence to conduct such business. If a Swedish custodian is delegated custody functions or where the fund administration services include trade settlement, the relevant entity must be authorised in accordance with the SMA.


What is the authorisation or licensing process for funds? What are the key requirements that apply to managers and operators of investment funds in your jurisdiction?

A Swedish fund is not, per se, subject to an authorisation or licensing process; instead, it is incumbent upon the manager of the fund to obtain authorisation from the SFSA to act as a fund manager. However, where a fund manager intends to manage a UCITS or an AIF formed as a special fund (a subcategory of domestic funds that derogate from a wider spectrum of regulation, and which is considered an AIF under Swedish law), the authorisation process includes a requirement that the fund rules must be approved by the SFSA.

To obtain authorisation to act as a fund manager, an application would have to be submitted to the SFSA accompanied by, inter alia, a programme of operations of the fund manager and the fund rules of the funds to be managed. Depending on the type of investment fund, slightly different rules will apply in relation to the authorisation process.

In relation to the management of UCITS and special funds, the following requirements and process apply. A Swedish investment management company must be a limited liability company and have a board of directors consisting of at least three members and a managing director. Any natural or legal person who holds or may be expected to hold a qualifying holding in the management company has to undergo an ownership assessment by the SFSA for the purposes of determining whether the natural or legal person is suitable for ownership of an investment management company. Further, a person who will serve as a member of the management body of the management company, or of the management body of an entity holding a qualifying holding in the management company, must undergo a management assessment by the SFSA.

The key requirement applicable to fund management companies primarily entails acting in the common interest of the unitholders. In general, a fund management company must conduct its operations in an honest, fair and professional manner so as to maintain the confidence of the public in the fund market. Further, the fund management company is obliged to have and maintain a minimum capital of own funds during its operations and to ensure that it has adequate risk management systems together with sound routines for the operation, accounting, internal control and management of its information systems.

A Swedish AIF manager (AIFM) applying for authorisation to manage an AIF other than a special fund would essentially need to comply with the requirements stipulated above and must be a legal person, but not restricted to the form of a limited liability company. The formation of the AIF (save for AIFs formed as special funds) is, however, not contingent upon the SFSA’s approval of the fund rules (or similar documentation).

The management of an AIF below a certain threshold (see below) may be carried out without authorisation provided that the AIFM is registered in the SFSA’s register. An unauthorised, registered AIFM may only carry out marketing activities to professional investors (as defined in the SMA). The exemption applies to AIFMs that manage AIFs whose assets under management in total do not exceed either:

  • €100 million if leveraged; or
  • €500 million when the portfolios consist of AIFs that are unleveraged and have no redemption rights exercisable during a period of five years following the date of the initial investment in each AIF.


These managers are subject to supervision by the SFSA, as well as the registration and reporting requirements under the AIFMD.

Territorial scope of regulation

What is the territorial scope of fund regulation? Can an overseas manager perform management activities or provide services to clients in your jurisdiction without authorisation?

Initially, a division must be made between managers established inside the European Economic Area (EEA) and outside the EEA. In the former case, the manager would need an authorisation in its home country and activities may subsequently be performed in Sweden either from the overseas manager’s home country or from inside Sweden, subject to the establishment of a Swedish branch office. If the manager has already been granted an authorisation in its home country within the EEA, pursuant to either the UCITS V Directive or the AIFMD, the overseas manager may ‘passport’ its licence into Sweden via the competent supervisory authority in its home country, and separate authorisation from the SFSA is thus not necessary. Following such passporting, it is also possible for the overseas manager to manage Swedish funds provided the manager’s authorisation in its home country includes management of fund types comparable to the type of Swedish fund the manager wishes to manage. In relation to management of a UCITS or a special fund, a separate authorisation must, however, be obtained from the SFSA that includes approval of the (revised) fund rules. The manager must also ensure that, in Sweden, it can make disbursements to unitholders, redeem units, provide investors with required information and handle complaints, which may be satisfied through the appointment of a local paying agent responsible for the aforementioned services. If an EEA-based manager wishes to manage a Swedish AIF that is not a special fund, no separate authorisation from the SFSA is required.

A fund manager established outside the EEA may only perform management activities or provide services to Swedish investors provided the manager has been granted an authorisation from the SFSA in accordance with the Swedish national regime.


Is the acquisition of a controlling or non-controlling stake in a fund manager in your jurisdiction subject to prior authorisation by the regulator?

The acquisition of a controlling stake (ie, a qualified holding) in a fund manager is subject to prior authorisation from the SFSA. The application must be submitted to the SFSA in writing. A qualified holding is defined as a direct or indirect ownership where the holding represents 10 per cent or more of the share capital or the voting rights or otherwise makes a significant influence of the fund manager possible. The latter is the case when, for example, a shareholders’ agreement allows for the appointment or dismissal of more than half of the members of the fund manager’s board of directors. Authorisation is also required prior to the increase of a holding through an acquisition where the holding would exceed 20, 30 or 50 per cent of the share capital or voting rights in a manager of UCITS funds. Should the acquisition of such a manager occur through the division of joint marital property, testamentary disposition, corporate distribution or another similar measure, an application for retaining the shares must be submitted to the SFSA within six months of the date of the acquisition. The AIFMA does not contain explicit rules on thresholds for when an approval from the SFSA is necessary other than when a holding is qualified although the same thresholds as for UCITS as stipulated above apply.

Restrictions on compensation and profit sharing

Are there any regulatory restrictions on the structuring of the fund manager’s compensation and profit-sharing arrangements?

In general, the fund manager’s compensation (ie, fees deducted from the fund assets) must be clearly disclosed to investors. Compensation may generally only be deducted in the form of fees that relate to management of the fund assets (including, for example, custody and transaction costs), subscription and redemption. Pursuant to the rules stipulated by the AIFMA and the SFA, a fund manager’s compensation must follow an established remuneration policy that is consistent with, and promotes, sound and effective risk management. A fund manager that provides advice to non-professional investors shall comply with the restriction of third-party provisions set out in the SMA, which establishes that the fund manager or an investment firm may only accept or give remunerations if such remunerations improve the quality of the service and do not affect the company’s ability to act honestly, fairly and in a professional manner, and provided that the client is provided with a full, correct and understandable description of such remunerations. This rule does not apply to remunerations that are necessary to provide the fund management or the service and as long as they are of such nature that they do not conflict with the company’s obligation to act honestly, fairly and professionally.

An investment firm that provides independent investment advice or discretionary portfolio management may not accept and retain remunerations of various kinds received from anyone other than the clients. The SIFA has issued guidance stipulating that, in the event income is derived from securities loans, the income must accrue to the fund. Any profit-sharing arrangement would have to be in compliance with the fund manager’s obligation to act in the interests of the unitholders. Internally, a Swedish fund manager shall have a remuneration system, as well as a remuneration policy, in place. Broadly, this policy shall be based on sound and effective risk management, taking into account the risk profile of the fund and the interest of the unitholders.

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