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

¹The fund man­age­ment com­pany, SICAV and as­set man­ager of col­lect­ive in­vest­ment schemes shall set down ap­pro­pri­ate risk man­age­ment and risk con­trol prin­ciples as well as the or­gan­isa­tion of risk man­age­ment and risk con­trol in in­tern­al guidelines.

²They shall in­clude the risks that:

a.

they are or could be ex­posed to as a res­ult of the en­tirety of their busi­ness activ­it­ies;

b.

the col­lect­ive in­vest­ment schemes man­aged by them as well as oth­er as­sets man­aged by them un­der the terms of man­dates are or could be ex­posed to.

³The in­tern­al guidelines shall set out:

a.

the or­gan­isa­tion of risk man­age­ment and risk con­trol, in­clud­ing the re­spons­ib­il­it­ies with­in the li­censee;

b.

the types of risk at the level of the activ­it­ies of the li­censee, the col­lect­ive in­vest­ment schemes man­aged, and the as­sets man­aged un­der the terms of man­dates;

c.

the pro­cesses and sys­tems for as­sess­ing and man­aging all ma­ter­i­al risks of the li­censee and the col­lect­ive in­vest­ment schemes, and in par­tic­u­lar their mar­ket, li­quid­ity and coun­ter­party risk;

d.

the tasks, re­spons­ib­il­it­ies and the fre­quency of re­port­ing to the board of dir­ect­ors and ex­ec­ut­ive board.

⁴When draft­ing the in­tern­al guidelines and struc­tur­ing the or­gan­isa­tion of risk man­age­ment, ac­count must be taken of the nature, scope and com­plex­ity of the trans­ac­tions car­ried out, the col­lect­ive in­vest­ment schemes man­aged, and the as­sets man­aged un­der the terms of man­dates.

⁵The use of in­vest­ment tech­niques and de­riv­at­ives must be gov­erned by in­tern­al guidelines and re­viewed peri­od­ic­ally. With re­spect to the use of de­riv­at­ives, the in­tern­al guidelines shall also gov­ern the fol­low­ing areas, in ac­cord­ance with the struc­ture and risks of the li­censee:

a.

Risk policy:

1.

Per­mit­ted de­riv­at­ives,

2.

Re­quire­ments to be met by coun­ter­parties,

3.

Mar­ket li­quid­ity re­quire­ments,

4.

In re­la­tion to the use of in­dex products: re­quire­ments in terms of rep­res­ent­at­ive­ness and cor­rel­a­tion;

b.

Risk con­trol:

1.

Iden­ti­fic­a­tion, as­sess­ment and mon­it­or­ing (con­trolling) of risks,

2.

Au­thor­it­ies and lim­its,

3.

Risk as­sess­ment pro­ced­ures,

4.

Es­cal­a­tion pro­ced­ures in the event of lim­it over­runs,

5.

Ad­di­tion­ally, for the mod­el ap­proach:

–

Meth­od of veri­fy­ing the risk as­sess­ment mod­els, in par­tic­u­lar VaR

–

Es­cal­a­tion pro­ced­ures and meas­ures in the event of un­sat­is­fact­ory res­ults of veri­fic­a­tion tests

–

Com­pos­i­tion of the bench­mark port­fo­li­os and changes to them, mon­it­or­ing of the pro­cess used to de­term­ine the bench­mark port­fo­lio

–

Stress tests;

c.

Pro­cessing and valu­ation:

1.

Doc­u­ment­a­tion of trans­ac­tions,

2.

Valu­ation mod­els to be used,

3.

Data and data sup­pli­ers to be used.