On 24 November 2013, the Swiss will have to vote on whether their employment compensation regime should become more egalitarian. A popular referendum promoted by the Young Socialist Party wants to limit executive compensation to 12 times the lowest salary within the same business undertaking. While a number of issues remain unclear at this stage, it is certain that the rather flexible and internationally competitive Swiss labor market would be severely impacted if the initiative were to be adopted by the Swiss people.

By Thomas Reutter (Reference: CapLaw-2013-27)

In recent years Switzerland has come under increased pressure to loosen its bank secrecy protection and allow foreign governments to obtain information on bank accounts held by its tax payers in Switzerland. After timid first steps initiated in 2009 to grant exchange of information in cases where the information is foreseeably relevant for the enforcement of domestic tax laws, under pressure from the OECD, the EU and the USA, Switzerland seems now to be defining a new strategy for its financial centre which may move away from a strict bank secrecy protection to enhanced transparency and even an automatic information exchange with foreign governments. This article discusses the current initiatives of the Swiss Government in its definition of a new strategy.

By René Bösch (Reference: CapLaw-2013-15)

On 13 February 2013 the Federal Council resolved to bring into force the revised Collective Investment Schemes Act (CISA) and its implementing Ordinance (CISO) as per 1 March 2013. The revised law has substantial impacts on the Swiss investment funds industry. Due to the altered regulatory concepts in terms of asset management regulation and distribution, particularly Swiss managers and advisors of foreign investment funds need to carefully analyze the revised CISA and potentially adapt their business models. This article highlights the new provisions relevant in this regards; it reflects the legal position as of 6 June 2013.

On 3 March 2013, Swiss citizens will vote on a constitutional initiative against excessive compensation. Pursuant to this initiative, shareholders of listed Swiss stock companies would have a binding vote on board and management compensation. Furthermore, severance payments and advance compensation of the board and the management of such companies would be banned.

In a recent decision of 30 October 2012, the Swiss Supreme Court held that banks are, as a matter of principle, obliged to account to their clients for inducements and trailer fees they received in connection with portfolio management agreements. Moreover, in the wake of this decision, FINMA issued guidance to all banks requiring them to inform all affected clients of this decision and implementing appropriate procedure to respond effectively to client claims.

The legislator gave FINMA powerful tools to enforce its interpretation of the financial market acts against regulated companies and individuals. Practitioners noticed that FINMA has been intensifying the use of such tools recently. At the same time FINMA’s willingness to settle disputes diminished. This article discusses from a practitioner’s viewpoint the rules FINMA has to follow during enforcement procedures and the appeal stages available to entities and individuals confronted with an adverse order by FINMA.

When assessing the turbulence on the financial markets of the last few years, one of the main outcomes for investors was a heightened awareness of cash and security arrangements. In particular, it has become en vogue among asset owners to ask their custodians to segregate client assets from the custodians’ proprietary assets. While asset segregation has thus become a global topic, the legal effects of such segregation may differ from jurisdiction to jurisdiction. This article provides a summary overview of the patterns of asset segregation and their (possible) effects under Swiss law.

The main purpose of the proposed revision of the Collective Investment Schemes Act (CISA) is to adjust the Swiss regulatory framework to current international standards, especially the UCITS- and AIFM-Directive, in order to enable Swiss based assets managers to access the European market. The draft legislation provides for a general authorization and supervision requirement for all Swiss based asset managers; it defines the scope of tasks of an asset manager, services which may be performed additionally and the possibility of delegation. SICAFs are required to appoint a regulated custodian bank; these banks will have to implement appropriate organizational structures. The concept of public advertisement will be replaced by the concept of distribution, which includes any offering of and advertising for a collective investment scheme; any kind of distribution will be subject to the authorization of the FINMA. Foreign collective investment schemeswill always be obliged to appoint a Swiss representative, who will have to ensure the compliance of the fund’s foreign management with the provisions of the CISA; the catalogue of persons that are regarded as qualified investors is being modified.

Based on articles 28 (2) and 34 (3) of the Banking Act, as amended (BA), the Swiss Financial Market Supervisory Authority (FINMA) has opened on 16 January 2012 a consultation, which has come to an end on 2 March 2012, on the complete revision of the FINMA Bank Bankruptcy Ordinance (BBO-FINMA). More precisely, the BBO-FINMA is intended to be repealed and replaced by the new Ordinance of the Federal Authority on the supervision of financial markets on the Insolvency of Banks and Securities Dealers (Bank Insolvency Ordinance-FINMA, BIO-FINMA or the Ordinance). The current draft of the BIO-FINMA provides for some innovations which are worth noting and may even have an impact on the competitiveness of the Swiss financial place as regards derivatives, securities lending and repo transactions.

Against the background of new regulatory developments in the European Union, Parliament will shortly debate a partial revision of the Collective Investment Schemes Act. The proposed legislative amendments focus on subjecting Swiss domiciled asset managers of foreign collective investment schemes to Swiss licensing and supervision requirements and introducing a new concept with respect to the regulation of distribution activities in relation to collective investment schemes. If adopted, the proposed changes would have a profound impact on the legal framework governing the distribution of such investment instruments in Switzerland.