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MPL launches service to aid asset managers as new Swiss rules bite

Tom Burroughes, Editor, London, 29 May 2015

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Managing Partners Limited, an investment house, has rolled out a service targeted at helping the thousands of Swiss asset managers it says are struggling to comply with a Swiss version of recently enacted European Union rules.

FINMA, the Swiss financial regulator, introduced on 1 March a version of the European Union’s Alternative Investment Fund Managers Directive and the EU’s MiFID regime (Markets in Financial Instruments Directive). The Swiss rules apply to managers and distributors of non-Swiss funds to Swiss investors and impose strict new organisational requirements and extra compliance costs for managers based in Switzerland. In particular, they require asset management companies in Switzerland to become directly authorised by FINMA if they manage more than SFr100 million ($104.7 million) in open-ended funds or more than SFr500 million in closed-ended funds.

"The new Swiss regulations require a 'stellar leap' in compliance capacity for many of the country’s 5,000 independent asset managers, which have been subjected to little more than money laundering regulations in the past,” MPL said recently.

Each firm, it said, must spend at least €1 million to become independently registered and licensed by FINMA under the new rules because of an increase in minimum capital requirements, additional staffing and compliance costs.

MPL said it will use its status as an international regulated fund management company to help Swiss and foreign managers seeking to distribute funds in Switzerland, to satisfy the prescribed procedures and obtain the required status to distribute their funds to qualified investors in Switzerland. The firm has a presence in Switzerland and the EU. It said that it was able to “provide effective solutions which both lower the costs and enhance the flexibility of Swiss-based managers seeking to maintain their involvement with non-Swiss funds”.

“FINMA has effectively been bounced into this because it needed to radically change the Swiss regulatory environment to bring it into line with new regulations introduced in the European Union. Whilst the Swiss should take significant pride in the fact that that such a high degree of ethics has negated the need for a radical overhaul of Swiss financial services practices, the European Union rules have forced the issue and if the Swiss financial services industry wishes to align itself with Europe, then these regulatory changes are inevitable,” said Jeremy Leach, MPL’s chief executive.

Most of the independent asset managers in Switzerland are small operations managing less than SFr250 million ($261.9 million) for private clients. Many of them have set up offshore funds in jurisdictions such as BVI and Cayman, which they have managed for years either directly or via an offshore company. These will now have to be directly regulated if they cannot demonstrate that these funds are managed by, or can be switched to, an established "fund manager of substance" outside Switzerland, the MPL statement said.

There are similar changes to upgrade regulation of private client asset managers and fiduciaries (with or without fund involvement).

At present, Swiss regulation is based solely on the basis of self-regulatory organisations monitoring anti-money-laundering procedures. MPL said this makes setting up a Swiss asset manager or trust company much less expensive than in many other OECD countries. New laws currently going through the parliamentary process – the Financial Institutions Act (FIA) and the Financial Services Act (FSA) - will be enforced from 2017-18 and will require much more onerous capital and staffing requirements than apply now, it said.

“This presents an unrepeatable opportunity for managers and trust companies outside Switzerland to consider setting up a small entity there – with the help of local partners such as MPL - which will benefit both from the low cost and generous grandfathering provisions when the new laws come in,” Leach added.

MPL is recognised by the Cayman Islands Monetary Authority as an asset manager, where it manages a number of collective investment schemes and regulated mutual funds. MPL currently manages funds with a gross value of $500 million.

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