Limited Qualified Investor Funds: new fund category exempt from FINMA authorisation and supervision

The Swiss parliament and Federal Council will launch a new category of fund that is exempt from authorisation on 1 March 2024. The new Limited Qualified Investor Fund (L-QIF) will not be authorised or supervised by FINMA. The Federal Council is simultaneously amending the Collective Investment Schemes Ordinance, particularly in the area of liquidity management, along with several other ordinances.
The Swiss parliament voted to introduce a new fund category, the Limited Qualified Investor Fund (L-QIF), in December 2021 and amended the Collective Investment Schemes Act (CISA) accordingly. The Federal Council will now put these changes into effect on 1 March 2024. L-QIFs are collective investment schemes that do not require FINMA authorisation or approval and are not supervised by FINMA. To be eligible, these funds must be offered solely to qualified investors and managed by entities that are supervised by FINMA.

Institutions responsible for compliance with the L-QIF rules

The institutions managing L-QIFs are responsible for complying with the L-QIF rules themselves. To ensure transparency, the fund must be designated on the front page of the fund documents and in advertising as a Limited Qualified Investor Fund or L-QIF. The fund’s exemption from authorisation, approval and supervision by FINMA also needs to be made clear to investors. The Federal Department of Finance (FDF) will maintain a public register of all L-QIFs. FINMA is not responsible for questions of interpretation in relation to an L-QIF or for issuing L-QIF-specific rules.

Further amendments to the legislation on collective investment schemes

The Collective Investment Schemes Act (CISA) and Collective Investment Schemes Ordinance (CISO) have also been amended in other areas to implement international standards, keep up to date with market developments and increase legal certainty.

In particular, the revised legislation creates a legal basis for domestic exchange-traded funds (ETFs) including new disclosure requirements. In line with international standards it also makes collective investment schemes more resilient by introducing additional regulations on liquidity. These are designed to ensure that a collective investment scheme’s liquidity position is appropriate for its asset class, investment policy, risk diversification, investor type and redemption frequency. Further liquidity requirements when managing collective investment schemes will also be added to the CISO.

The creation of “side pockets” is being put on a statutory basis. This involves segregating individual assets within an open-ended collective investment scheme that have become illiquid. Another provision stipulates the required procedure and notification requirements if a scheme’s investment rules are actively breached.

Transitional arrangements for collective investment schemes that are already authorised

The new provisions in the CISA and CISO enter into force on 1 March 2024 and will be applicable to new collective investment schemes from this date. However, two-year transitional periods will apply in certain areas to collective investment schemes that have already been authorised or approved, for example in relation to the new disclosure requirements for securities lending and repurchase transactions and Swiss ETFs. The liquidity requirements must also be met by existing collective investment schemes within two years of the changes entering into force, while new collective investment schemes (including L-QIFs) will have to fulfil the rules from their inception date. 

Federal Council press release