FAQs
Asset management companies are financial intermediaries recognised throughout the European Economic Area (EEA) whose legal basis is set out in accordance with EU law. This means that asset management companies can benefit from the freedom of establishment and the freedom to provide services through their "EU passport". Asset management companies are able to set up branches or provide services throughout the EEA without significant bureaucratic overhead.
Moreover, asset management companies are subject to recognised prudential supervision. This in turn facilitates market entry in third countries.
A further advantage is that asset management companies can also make use of tied agents in the provision of services.
A distinction is made between professional and retail clients. This distinction is important with regard to clients' need for protection. Retail clients need more – and more descriptive – information about the investment products and the various risks. Professional clients, on the other hand, are familiar with financial instruments and investment services and would therefore find overly extensive information and clarification obligations inappropriate or even detrimental to business. The Government has issued an ordinance setting out the scope of these simplifications.
Beyond the areas of asset management already protected under the Banking Act and the Investment Undertakings Act (IUG), the VVG provides additional comprehensive protection for the interests of investors:
- Companies wishing to offer asset management services are examined in detail before they receive a license from the FMA.
- The FMA is mandated to supervise asset management companies on a permanent basis. It does so by way of inspections, conditions set out by law, and reporting obligations.
- The VVG contains detailed investor protection provisions with which asset management companies must comply when providing services.
- A dedicated conciliation board is available to resolve disputes between clients and their asset management companies in an efficient, cost-effective, and targeted manner. The conciliation board is invoked prior to any ordinary civil proceedings.
- The Deposit Guarantee and Investor Compensation Foundation PCC (EAS) serves as a dedicated investor compensation scheme (ICS). In the event of a compensation case, investors receive compensation up to a maximum of CHF 30,000.
The catalogue of activities includes the performance and mediation of the following services:
a) Investment services and activities
1.) Portfolio management:
Portfolio management is the management of portfolios in accordance with mandates given by clients on a discretionary client-by-client basis where such portfolios include one or more financial instruments (Article 4(1)(2) VVG). At least one financial instrument as referred to in Article 4(1)(10) VVG must be contained in the portfolio.
2.) Investment advice:
Investment advice is the provision of personal recommendations to a client, either upon the client's request or at the initiative of the asset management company, in respect of one or more transactions relating to financial instruments (Article 4(1)(3) VVG). This also includes the following activities:
a.) Portfolio analysis, meaning the analysis of portfolios containing one or more financial instruments;
b.) Advice on portfolio and asset structuring (asset allocation);
c.) Financial planning, meaning consideration of the aspects relating to financial instruments with regard to investments, pension provision, insurance, taxes, and budgeting as a whole. The subareas are not analysed in isolation, but rather are presented with their links to the other subareas. The main contents of financial planning are the analysis and reconciliation of expenses, savings, and the development of assets over time. Advice on the selection of financial instruments is provided on the basis of the findings resulting from the analysis, taking into account the needs and goals of the client.
d.) Fund selection.
3.) Reception and transmission of orders in relation to one or more financial instruments:
The reception and transmission of orders in relation to one or more financial instruments includes in particular the distribution of funds and the mediation of other securities in the sense of forwarding subscription certificates and orders. The transmission exclusively involves the transmission of orders, never of assets.
4.) Execution of orders on behalf of the client:
This activity involves the conclusion of agreements to buy or sell one or more financial instruments on behalf of clients. It also includes the conclusion of agreements for the sale of financial instruments issued by an investment firm or bank at the time of their issue. Not included is the mere transmission of securities orders by the asset management company to the custodian bank as part of portfolio management if the custodian bank then executes these orders accordingly.
b) Ancillary services
1.) Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments that directly serve the purpose of customer care: Companies that carry out analysis activities on a commercial basis require a licence under the VVG if the analysis results are used directly for individual client advice and are passed on to clients as recommendations.
2.) Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings.
The asset management company must be established in the legal form of a legal person – which includes trust enterprises and public European companies (Societas Europaea) – or a limited partnership or general partnership. Asset management by sole proprietorships (natural persons) is not permitted.
A licence from the FMA is required to operate an asset management company. The licence is granted if the conditions set out in Article 6 VVG are met. Under the licensing conditions, the company must have its registered office and head office in Liechtenstein, a suitable permanent establishment in terms of personnel and premises, and an organisation appropriate to performance of its responsibilities.
The professional and personal qualities of the persons entrusted with the governance and management of the company must guarantee sound and proper business operation. As a rule, the senior management must consist of at least two persons who must actually work for the company in a management capacity and meet the conditions set out in Article 7 VVG. If the company provides for only one senior manager, evidence of effective, sound, and prudent management of the company must be provided, with adequate consideration of the interests of clients and the integrity of the market. In addition, it must be shown that continuation of the asset management company upon loss of the senior manager's capacity to act is ensured without interruption through appropriate rules governing substitution and succession (Article 7(1b) VVG).
At least one of the senior managers as referred to in Article 7(1a) VVG must have EEA or Swiss citizenship and – taking into account the senior manager's other obligations, the organisation of the company, and the senior manager's place of residence – the senior manager must be able to fulfil the responsibilities in the asset management company without reproach. The senior manager must also be sufficiently qualified for the intended position, on the basis of education and professional experience, and have a minimum of three years of relevant full-time practical experience. The senior manager must have the powers necessary for senior management and must actually work at the Liechtenstein registered office with a workload appropriate to the demands of the company.
In addition to fulfilling the requirements applicable to the senior management and the management body (Article 7a VVG), a viable programme of operations including the organisational structure of the company must be presented, an auditor appointed, the ownership of the company disclosed, and evidence must be provided of adequate own funds under Article 8 VVG and initial capital of no less than CHF 100,000.
More detailed information on the licensing conditions can be found in the applicable instruction.
Senior management is the actual management of an asset management company by a natural person. The requirements at the level of senior management are governed by Article 7 VVG. In addition to citizenship (Liechtenstein, EEA, Switzerland, or equivalent status on the basis of international treaties), the senior manager must have the appropriate education and practical experience (at least three years of experience in a comparable position).
Furthermore, the senior manager must be of good repute and must actually work for the company in a managing capacity. The senior manager must either be a partner (in the case of partnerships) or an employee (in the case of legal persons) in a long-term employment relationship. Article 7(2) VVG sets out that one and the same person may only be senior manager of at most two asset management companies. This ensures that the senior manager actually has sufficient free capacity to fulfil the relevant responsibilities without reproach.
A dedicated procedure is established for disputes between clients and asset management companies: The Government appoints a conciliation board to settle disputes between clients and asset management companies concerning the services provided. This conciliation board is responsible for mediating as appropriate in disputes between the parties and in this way for reaching a settlement between the parties. The conciliation board thus assumes the responsibilities of a mediator. If no settlement between the parties can be reached, then the parties are referred to the ordinary legal process; mandatory mediation is then discontinued.
An important element of the VVG is that domestic asset management companies have the possibility to operate in the EEA, benefiting from the freedom of establishment and the freedom to provide services through their "EU passport". This means that asset management companies are able to set up branches or provide services throughout the EEA without significant bureaucratic overhead.
Asset management companies may provide their services in other EEA Member States based on notifications between national competent authorities (so called "EU passport").
The Legal Entity Identifier (LEI) is an internationally standardised and globally valid identifier for financial market participants. One of its purposes is to unambiguously identify business partners (such as companies, banks, or investment funds) in order to fulfil reporting obligations to supervisory authorities. The LEI code is a 20-digit string of alphanumeric characters based on the ISO 17442 standard.
LEIs are issued by Local Operating Units (LOUs) of the global LEI system and renewed annually. Since the LEI is a public good, there is no competition among LOUs, which means that prices and the required information do not differ significantly among LOUs. A list of LEI issuers is available at the following link:
http://www.leiroc.org/publications/gls/lou_20131003_2.pdf
LEIs can be requested from any LOU. WM Datenservice and Bundesanzeiger Verlag GmbH are established providers in German-speaking Europe.
The process as well as the costs for obtaining an LEI are transparently shown on the websites of the providers.
The LEI has to be obtained only once for each legally independent company. Cross-border services or services provided through a branch therefore do not require an LEI abroad.
However, foreign subsidiaries as legally independent parts of a Liechtenstein company must apply for their own LEI in order to fulfil reporting obligations to the competent supervisory authority.
Persons subject to due diligence must appoint a contact person, a compliance officer, an investigating officer, and a member of the executive body who is responsible for ensuring compliance with the Due Diligence Act (SPG) and the Due Diligence Ordinance (SPV). An obligation to notify the FMA of the appointment and any change of these persons is set out in the partial revision of due diligence law, which entered into force on 1 September 2017.
The duties of the investigating officer are defined in Article 35 SPV and include in particular the obligation to conduct internal inspections. Within the framework of these inspections, it must also be checked whether due diligence obligations are being properly fulfilled in general. Proper fulfilment of those obligations is the responsibility of the compliance officer pursuant to Article 34(a) SPV. In principle, the position of compliance officer and investigating officer should not be fulfilled by one and the same person.
This requirement is not mandatory for asset management companies if the compliance function under the VVG (or the corresponding compliance officer) simultaneously performs the functions of compliance officer and investigating officer under the SPG. The reason for this is that the VVG (following MiFID) ensures the independence of the compliance function, so that asset management companies can appoint their compliance function under the VVG as their compliance officer and investigating officer under the SPG.
No, this is no longer possible as of 3 January 2018.
The Markets in Financial Instruments Directive 2014/65/EU (MiFID II) lays down rules that strongly affect the regulatory scope of professional guidelines. The MiFID II provisions no longer give national legislative powers discretion in this regard, so that the subject matters covered by professional guidelines are now largely governed by the VVG following implementation of MiFID II (see page 159 of Report and Motion BuA 2017/14). This means that there is no longer a need for the FMA to be able to declare professional guidelines binding, so that this option is no longer available as of 3 January 2018 pursuant to amendment of Article 14(3) VVG (Liechtenstein Law Gazette LGBl. 2017 No. 398).
In addition to the provisions set out in the VVG, extensive rules of conduct are contained in Commission Delegated Ordinance (EU) 2017/565, which is referred to in Annex 1 of the VVO and is directly applicable in Liechtenstein.
The Association of Independent Asset Managers in Liechtenstein (VuVL) retains the right to issue professional guidelines for its members in accordance with its articles.
In principle, asset management companies as referred to in Article 3(1)(i) SPG are subject to due diligence in regard to all of their business relationships. In the case of pure financial analysis (without investment advice or other activities referred to in Article 3(1) VVG), the activity of the asset management company is limited to analysis and, within the scope of this activity, it neither has authorisation to manage the client's assets nor is it aware of the origin of the assets. An asset management company is therefore under no obligation to identify the contractual partner or the beneficial owner in the case of pure financial analysis, as explained above, or to carry out risk-adequate monitoring. These due diligence obligations must be fulfilled only if, after the initial request, follow-up activities are taken up in this business relationship that go beyond pure financial analysis (i.e. activities subject to due diligence under Article 3(1) VVG).
In regard to an EEA AIF/EEA UCITS (which, as a regulated fund, is itself subject to due diligence), a Liechtenstein asset manager may, in the event of active refusal (example of evidence: letter by the foreign fund management with refusal to provide the unit register, e.g. due to banking secrecy), identify the governing body in accordance with Article 3(1)(a)(2) SPV or Article 3(1)(b)(6) SPV. The senior management of the management company – in the case of a collective trust – or the board of directors of the SICAV – in the case of an investment company – are identified as the beneficial owner in the alternative. The active refusal must be verified each year, and a copy must be included in the due diligence file.