Why the New Fund Documentation is a Challenge to Swiss Asset Managers? The Implications of the New Operational Requirements | FinIA / FinSA
Swiss Asset Managers now face new challenges on fund distribution, product development, client segmentation, and documentation. These challenges are not only limited to legal and compliance teams. They also touch on operational functions like risk management, IT, marketing, sales, and human resources.
The new regulations will create additional work for Swiss asset managers and introduce new operational requirements. It’s now obvious that challenges facing asset managers in 2022 will be manifold. If companies don’t act now, they may find themselves struggling to stay ahead of regulatory changes.
For instance, service providers will have to demonstrate enhanced due diligence upon onboarding their customers. They’ll monitor them on an ongoing basis to ensure compliance with anti-money laundering regulations.
The asset managers must ensure there’s adequate documentation to support their processes and controls. Also, they must comply with the new reporting requirements.
Asset managers are required to provide investors with more information on their products. The legal documents will have to be adapted and updated. Most probably, they will need to be translated into other languages.
Currently, Financial Services Act (FinSA) requires a prospectus to be submitted concerning the admission of securities when trading on an exchange platform. Unless this requirement is complied with, trading in the securities will not be permitted. This is necessary for offers extended to non-accredited investors and investor groups.
The law specifies exemption from the requirement to issue a prospectus if it targets less than 500 individuals. Besides, many asset managers in Switzerland have already requested FINMA for an extension of the mandatory use of revised prospectuses deadline. They're now seeking an extension of the deadline from December 31, 2021, to June 30, 2022.
To avoid misunderstandings, the AMAS Code of Conduct comes in handy. It stipulates that third parties appointed to sell collective investment schemes in Switzerland must have a written agreement with the Valuer on the tasks delegated.
The primary objective of the KID is to provide investors with essential information needed to make well-informed decisions. Yet, it's important to remember that the requirements differ from the European version.
Thanks to the Federal Government extension, the KID for complex financial instruments will be in place by the new deadline of December 31, 2022.
Sources:
- Application of certain mentioned requirements of the Swiss Financial Services Act ("FinSA") as of January 1, 2022.
- Financial Institutions Act, FinIA
- https://www.finma.ch/en/authorisation/asset-management/
- https://www.finma.ch/en/supervision/asset-management/
