Private placement rules and law in Switzerland

1. Summary of private placement provisions for fund interests (if applicable)

Switzerland is not a Member State of the EU and is thus not subject to the AIFMD and the respective rules. Switzerland has its own

  1. set of rules, laid down in the Financial Services Act (“FinSA”, Finanzdienstleistungsgesetz) and the corresponding ordinance (“FinSO”, Finanzdienstleistungsverordnung), as well as the Collective Investment Scheme Act (“CISA”, Kollektivanlagegesetz) and the corresponding ordinance (“CISO”, Kollektivanlageverordnung); and
  2. terminology related to funds or collective investment schemes (“CIS”), the term commonly used in Switzerland for any type of fund, as well as related to the terms retail, professional, institutional and non-qualified and qualified investors.

The statutory regulation on placements of CIS covers (I.) the product, (II.) the distributor and (III.) the documentation.

Product Level 

Distribution to the public (non-qualified / retail investors) requires that the foreign CIS is registered with the Swiss Financial Market Supervisory Authority (“FINMA”) – so called “passporting” – which involves the appointment of a Swiss representative and a Swiss paying agent;

Distribution to a limited group of qualified investors, namely high-net-worth retail clients and private investment structures created for them having declared an "opting out" (“Opting Out-HNWI”), requires the appointment of a Swiss representative and a Swiss paying agent, but no passporting;

Distribution to all other qualified investors is possible without passporting and without appointment of as Swiss representative and paying agent. 

Distributor Level

The marketing of CIS is considered a financial service pursuant to FinSA. Therefore, individuals or entities marketing CIS to Swiss investors have to adhere to the following duties:

  1. Duty to register client advisers in a FINMA approved advisers' register;
  2. Duty to affiliate with an ombudsman's office;
  3. Duty to classify Investors according to Swiss law (i.e. retail clients, professional clients or institutional clients);
  4. Duty to comply with certain rules of conduct; and
  5. Duty to comply with certain organizational requirements.

There are certain exceptions from or facilitations to theses duties if CIS are marketed to professional or institutional clients only and, as with the past regulation, there is also a reverse solicitation exception.

Documentation Level

Any person making in Switzerland an offer to the public for securities (including CIS) must, as a rule, publish a prospectus. 

There are activities not considered to be an offer to the public, namely:

  1. making available information at the request or initiative of the client, not preceded by advertising;
  2. merely mentioning financial instruments, as the case may be in conjunction with factual or general information (such as ISINs, net asset values, prices, risk information, price performance or tax figures);
  3. merely making available factual information; and
  4. preparing and making available legally or contractually required information and documents on financial instruments to existing clients or financial intermediaries (such as corporate action information or invitations to general meetings).

In addition, there are a number of explicit exceptions from the prospectus duty that can be invoked even in case of an offer to the public, inter alia, if the offer

  1. is addressed solely to investors classified as professional and/ or institutional clients;
  2. is addressed to fewer than 500 investors;
  3. is addressed to investors acquiring securities with a value of at least CHF 100,000;
  4. has a minimum denomination per unit of CHF 100,000; or
  5. does not exceed a total value of CHF 8 million over a 12-month period.
  6. Securities that employers or affiliated companies offer or allocate to current or former members of the board of directors or management board or their employees are also exempted from the prospectus duty.

Beyond the rules on prospectuses, a Key Investor Information Document (“KIID”) may be required and there are rules on advertising, in particular that advertising must be indicated as such.

Prospectuses and KIIDs approved under other legal frameworks, in particular the EU, may however be used in Switzerland provided that certain standards are met.

2. Other forms of possible placement options for fund interests outside fund regulations

As shown above, the distribution of fund interests (CIS) to qualified investors, respectively professional and institutional clients (except for the distribution to Opting Out HNWI) are exempt from the requirements on the product level. Furthermore, if only professional and institutional clients are targeted neither a prospectus nor a KIID is required.

On the distributor level however, individuals and entities distributing CIS in Switzerland must meet certain requirements also if only professional and institutional clients are targeted (even if, particularly in the latter case, these requirements are very limited).

Swiss law does not provide for specific pre-marketing rules, i.e. a list of specific activities which do not fall within the scope of the applicable marketing rules at all, or trigger lower requirements (such as a mere notification duty). However, marketing activities must generally relate to a specific financial instrument, respectively a specific CIS, to qualify as (i) financial service under the FinSA, or (ii) offer under the CISA, triggering the duties on the distributor level under the FinSA or the product level under the CISA described below. Activities such as testing the appetite for a certain investment strategy, or providing general information not concerning a specific financial instruments (e.g. sector outlooks) should thus not trigger such duties.

3. Consequences of non-compliance with placement regimes for fund interests

Violations of the placement rules are subject to criminal penalties, the placement itself remaining however valid. Moreover, FINMA may act against private individuals or legal entities violating the placement rules and/ or acting without the required licence or registration and, for such purposes, initiate investigations, which could lead, for instance, to a seizure and foreclosure of illicit gains or the liquidation of the legal entity at issue. Eventually, the responsible persons may also become liable for damages which investors might suffer.

Transitional periods

The FinSA and the revised CISA (as well as the corresponding ordinances) providing for the above mentioned rules entered into effect on 1 January 2020 but there have been various transitional periods. However, the last relevant transitional period ended on 31 December 2021, and, the new rules must thus now be adhered in full to when marketing CIS in Switzerland (to the extent applicable).

4. Private placement rules for non-fund investments available

Private placement outside the fund regulation is available for structured products, such as inter alia:

  1. financial instruments with capital protection or a maximum return; and
  2. certificates (“Structured Products”).

Private Placements of Structured Products to non-qualified investors/retail clients are exempt from the above mentioned requirements on the product level – but not on the distributor and the documentation level – if

  1. either the investors have entered into a permanent portfolio management or investment advice relationship; or
  2. the Structured Products are issued, guaranteed or provided with an equivalent protection by prudentially supervised financial intermediaries (such as banks, securities dealers or insurance companies or foreign entities subject to a similar, prudential supervision).

With respect to further financial instruments such as equity securities, bonds or derivatives the above mentioned rules on the product level do not apply. The rules concerning the distributor level and the documentation level must, however, also be respected with respect to such further financial instruments (if applicable). The most noteworthy exception (which has not yet been mentioned) relates to the KIID, which is not required in case of equity securities or plain vanilla bonds.

The rules regarding non-fund investments have also been subject to transitional periods, which, however, ended the latest on 31 December 2021.

Definition of “private placement” in respect of non-fund investments

The term private placement is not a technical term in Switzerland, neither with respect to CIS, nor with respect to non-fund investments.

However, the above mentioned exceptions concerning CIS generally also apply with respect to non-fund investments. In particular, if only professional and institutional clients are targeted neither a prospectus nor a KIID are required and, on the distributor level, there are only limited requirements, particularly if distributors address only institutional clients.