Along with banking and securities trading, investment fund business is the core area of regulatory protection for investors in the Swiss financial markets. Investors in an investment fund as consumers of financial products have the right to demand a transparent structure of the fund, the use of readable and understandable prospectuses and adequate pricing of the fund manager's services. Moreover, the fund manager should always act in the interests of the investor and take the latter's capacity and willingness to take risks into proper consideration.
Switzerland's investment fund law, first enacted in 1967, was thoroughly modernized in 1995 to provide, among other things, a legal basis for self regulation of the investment fund industry. The Association of Swiss Investment Fund Managers has adopted a body of rules of professional conduct which are binding on its members starting this year. Though the investor cannot invoke these rules directly when going to court with a claim that their rights have been breached, the judge will use the rules as a guideline to determine whether or not the performance of the fund manager was up to industry standards.
The salient points of these rules merely reflect existing good practice:
- the investment policy must comply with the strategy proclaimed in the prospectus;
- risks must be clearly stated, reporting on performance must comply with international standards (and must be accompanied by the statement that past records are no guarantee of future performance);
- cost accounting must be made transparent to the unsophisticated investor;
- the fund manager must regularly provide the investor with an objective and fair account of what happened to his or her investment.
The Federal Banking Commission has endorsed these rules of conduct and will ensure, as the supervisory authority, that they are complied with.