Some non-EU managers are running into an unexpected compliance hurdle on the Swiss fundraising trail, legal sources tell pfm.
Catching some by surprise is a requirement to appoint a local “representative” that establishes legal domicile for the fund in Switzerland, provides fund oversight services and acts as a communication channel between the GP, local investors and Swiss regulators.
“Switzerland has long been considered a friendly country to market private funds, so some sponsors won’t have anticipated the need to appoint people on the ground before fundraising,” said Latham & Watkins funds partner Tom Alabaster. “It’s a simple process, but it needs to be done before distributing marketing materials”.
In 2013, the Swiss government updated its Collective Investment Schemes Act (CISA) in reaction to EU member states strengthening their own fund regimes as part of the Alternative Investment Fund Managers Directive (AIFMD). Unlike the requirements of the directive, fund managers looking to raise cash in Switzerland must appoint a local representative and a paying agent (namely, a Swiss bank) before distributing any marketing material to Swiss banks, pension funds, family offices and certain other “qualified investors.”
Some investors are exempt from the requirement – primarily banks, regulated insurance companies and licensed securities dealers.
Fund managers have until the end of February to appoint a representative or cease all fundraising activities in Switzerland until doing so. The rules do not apply retroactively to funds raised before March 2013.
“Fortunately for GPs the appointment of a representative can take as little as a few weeks,” said Debevoise & Plimpton international counsel Sally Gibson. “However, given how close we are to the deadline, it’s not something that should be put off.”