New Rules For Exchange Traded Funds (ETFs)

• Published date: 03 April 2024
• Law Firm: Kellerhals Carrard
• Author: Dr. Dominik Oberholzer, Armin Kühne, Luca Bianchi, Sarah Mostafa, Michael Kremer and Rim Zaouia

The Federal Council adopted the amended Col'lective Investment Schemes Ordinance (CISO) on 31 January 2024. Not only does the revised CISO introduce the legal basis for the Limited Qualified Investor Fund (L-QIF)", but it also made selective adjustments to other areas. The new regulations encompass provisions applicable to Exchange Traded Funds (ETFs). The new rules have entered into force on 1 March 2024.

1. Introduction

On 31 January 2024, the Federal Council published the amendments to the CISO for the introduction of the L-QIF. It also included the new art. 106 and 127b in the CISO. These provisions are important for ETFs, as they primarily enable listed and unlisted classes to be issued in the same collective investment scheme.

An associated amendment to the Collective Invest'ment Schemes Act (CISA) and the Collective Invest'ment Schemes Ordinance-FINMA (CISO-FINMA) is not necessary, as they do not contain any rules speci'fically for ETFs.

2. The amended provisions of the ordinance

The Federal Council has implemented three amend'ments:

• The Federal Council has removed art. 40 para. 5 CISO, which was the only existing provision in the collective investment scheme law for ETFs that was in effect until now.
• The Federal Council has introduced the new art. 106 CISO. The previous art. 106 CISO has already been repealed on 1 January 2020 meaning that this provision had been blank" until now.
• Finally, with article 127b CISO, the Federal Council has introduced a provision for foreign ETFs only.

An English office translation of art. 106 and art. 127b CISO can be found at the end of this publication.

3. Principle: ETF definition at class level

ETFs are now defined as follows in art. 106 para. 1 CISO: ETFs are units of an open-ended collective investment scheme that are permanently listed on a Swiss stock exchange and for which a market maker has been ap'pointed (art. 106 para. 1 CISO).

What is new about this definition is that it applies at class level - provided that the collective investment scheme is divided into classes. Previously, however, the defini'tion was connected to the entire collective investment scheme, meaning that the entire collective investment scheme was considered an ETF or not.

4. ETF-classes and non-ETF-classes

For Swiss collective investment schemes, this defini'tion means the following:

If listed and unlisted classes are possible, one and the same collective investment scheme can have both classes that are listed on a stock exchange...