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The Swiss Federal Banking Commission has circulated a draft regulation that defines the term public offering as used in the Investment Fund Act. The Act codifies the current practice of the Federal Banking Commission regarding the term public offering not only under the Investment Fund Act but also under the Banking Act and under the Stock Exchange Act.

The term public offering has both a quantitative and a qualitative aspect. An offering is deemed a public offering only if the offer is made to more than 20 investors in or from Switzerland (quantitative element). However, if such an offering is made based on a qualified connection between the offeror and the prospective investor, the offering is not deemed public even if made to more than 20 investors. Such a qualified nexus is recognized only for distribution of foreign funds to institutional investors with a professional treasury, fund-based asset management pursuant to a written asset management agreement and asset management by banks and brokers/dealers (supervised by the Commission) pursuant to a written asset management agreement for clients with funds in excess of CHF5 million ($3 million).

The draft regulation also clarifies the Commission's view of offerings through the internet. The use of the internet is in itself regarded as a public offering, unless the website contains a qualified disclaimer stating that the offered units may not be distributed in Switzerland or an access restriction for users domiciled in Switzerland. However, participating in discussion sites is not regarded as a public offering.

The draft regulation is now being circulated among professional associations of the Swiss financial industry.

Dr Andreas Huenerwadel

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