Ordinance of the Swiss Financial Market Supervisory Authority on Collective Investment Schemes

The fund man­age­ment com­pany, SICAV or their agents must com­ply with the fol­low­ing du­ties and re­quire­ments when man­aging the col­lat­er­al:

a.

They must di­ver­si­fy the col­lat­er­al ap­pro­pri­ately in terms of coun­tries, mar­kets and is­suers. Ap­pro­pri­ate di­ver­si­fic­a­tion of is­suers is deemed to have been achieved if the col­lat­er­al of a single is­suer held does not cor­res­pond to more than 20 per­cent of the net as­set value. De­vi­ation from this rule is per­mit­ted if the col­lat­er­al meets the re­quire­ments of Art­icle 83 para­graph 1 CISO¹ or the ap­prov­al con­di­tions set out in Art­icle 83 para­graph 2 CISO are met. If col­lat­er­al is provided by more than one coun­ter­party, an ag­greg­ate per­spect­ive must be en­sured.

b.

They must be able to ob­tain power of dis­pos­al over, and au­thor­ity to dis­pose of, the col­lat­er­al re­ceived at any time in the event of de­fault by the coun­ter­party, without in­volving the coun­ter­party or ob­tain­ing its con­sent.

c.

They may not re-lend, re-pledge, sell or re­in­vest col­lat­er­al pledged or trans­ferred to them or use it as part of a re­pur­chase trans­ac­tion or to hedge ob­lig­a­tions arising from de­riv­at­ive fin­an­cial in­stru­ments. They may only use cash col­lat­er­al re­ceived in the cor­res­pond­ing cur­rency as li­quid as­sets or in­vest it in high-qual­ity gov­ern­ment bonds and dir­ectly or in­dir­ectly in short-term money mar­ket in­stru­ments or use it as a re­verse repo.

d.

If they ac­cept col­lat­er­al rep­res­ent­ing more than 30 per­cent of the fund as­sets, they must en­sure that the li­quid­ity risks can be cap­tured and mon­itored ap­pro­pri­ately. Reg­u­lar stress tests must be car­ried out that take ac­count of both nor­mal and ex­cep­tion­al li­quid­ity con­di­tions. The con­trols car­ried out must be doc­u­mented.

e.

They must take ac­count of the risks as­so­ci­ated with the man­age­ment of col­lat­er­al in their risk man­age­ment pro­cess.

f.

They must be in a po­s­i­tion to at­trib­ute any un­covered claims re­main­ing after the real­isa­tion of col­lat­er­al to the se­cur­it­ies funds whose as­sets were the sub­ject of the un­der­ly­ing trans­ac­tions.