Feel the Berne! Berne Financial Services Agreement between UK and Switzerland

By | News

Many years have passed since Brexit, and clarity is slowly returning around cross border financial service regulation. On December 21, 2023, Switzerland and the UK signed a mutual recognition agreement for financial services, through recognition of equivalence of national legislation and regulations in banking, investment services, asset management and insurance. The aim of the agreement is to enhance collaboration between the two countries, all the while guaranteeing client protection. For Switzerland this is excellent news, providing a strong partner with a large financial market outreach. The positive ramifications of this agreement, which extend well beyond Switzerland’s borders, are worth understanding.

Switzerland has strived to align its regulations with the European Union, but achieving EU equivalence recognition of its financial regulatory framework is far from being a reality. At times this has left Switzerland isolated in the middle of the EU since its refusal to join the Union in 1992. The UK-Swiss agreement marks a vital step towards financial reintegration. Pending parliamentary approval in both countries, it will enable reciprocal provision of financial services. Additionally, the intent is to cooperate in the areas of regulation and surveillance, providing relief from the stringent and often cumbersome EU rules.

Switzerland’s reputation for stability and innovation makes it an appealing financial hub. This regulatory cooperation heralds a synergy of UK’s progressive financial services and Swiss expertise, opening new avenues.

Together, Switzerland and the UK create a strong, sizeable, and accessible marketplace. For Switzerland this agreement is an important step internationally and shows the willingness of the government to continue playing an important role in financial services and the opportunistic nature of a small but very wealthy country.

Market size

The Swiss wealth management market is estimated to be approx. CHF 5 trillion, for 2024 according to Swissbanking’s data show Switzerland as a global leader in cross-border wealth management with approx. 60% of foreign private assets. Developing a fund-raising strategy to target this market has high potential through its size but also through the diverse composition of the investor types.  A fund-raising strategy that would also include the UK (approx. USD 9.57 trillion projected for 2024 by gives access to a combined huge investor base and should raise interest from numerous investment management firms.

The European Union faces harmonization challenges. The AIFMD directive, subject to varied transpositions by member states, creates uneven market access. For investment managers based at a distance from Europe, initiating fund raising efforts in the region is often met with apprehension pertaining to navigating a potentially large market, but with myriad of regulatory hurdles, markets of varying sizes, investor types, not to mention languages. This complexity can deter investment managers from engaging with the EU markets, particularly if one does not yet have previous experience in the region. Relying on reverse solicitation as a fund-raising strategy to avoid the regulatory hurdles, as has been done by many over time, is a strategy with very little scope for growth and carries increasing amounts of regulatory risks.

The Good News

Post-Brexit, the UK has maintained open access to its professional investor market with clear rules. The Swiss institutional and professional investor market is also easily accessible, with some regulatory requirements that need to be adhered to. Together, they represent a significant investor pool, enabling a comprehensive European marketing strategy without initially delving into other EU markets.

For a US-based investment manager for example, looking to set up a permanent presence in the region, the agreement between the UK and Switzerland is good news. By setting up in the UK, in a similar culture and language, the mutual recognition allows access to the two largest wealth management markets in Europe. Regarding the European Union, regulatory solutions can then be looked at to access the most interesting pockets of institutional and professional investors that are present across the most accessible European territories, such as the Nordics.

Mont-Fort has developed a practical and pragmatic range of services to assist you in developing and implementing your European and Swiss fundraising strategy. Please reach out if you would like to learn more.


Anne-Cathrine Frogg
Managing Director, Mont-Fort Funds AG

EU & Swiss fund distribution – yes, we can(t)!?

By | News

Brexit, AIFMD review, MIFID Cross Border Marketing Directive, Swiss FinSA….

Several material regulatory and political developments lie behind us. Whilst there is more to come, this is an opportune time revisit the state of play for private fund distribution in the Europe.

Taking a high-level view, PE fund sponsors can (i) attempt to comply with the EU distribution rules (AIFMD/MIFID as applicable), (ii) outsource all or parts of their fundraising or (iii) ignore the rules. We have seen clients (and their legal advisors) opting for each one of these approaches even though we notice a definite shift away from the “ignore” approach, which mainly runs under the guise of “reverse solicitation”.

Most sponsors naturally aspire to “direct compliance” but this is easier said than done. Direct compliance requires significant investment and typically involves setting up an EU regulated entity along with boots on the ground. We have seen several large multi-fund platforms embarking on that journey. Whilst they have the required internal resources and external advisors, they still struggle with a number of important but unresolved regulatory questions.

Since Brexit, UK regulated (as well as other non-EU) sponsors find themselves prevented from marketing to EU investors directly. As a reminder, the most typical set-up is a non-EU sponsor raising capital into an EU AIF (Alternative Investment Fund), typically hosted by a third-party EU AIFM (Alternative Investment Fund Manager). This set up is usually chosen to cater to EU investors shunning offshore vehicles. Whilst an EU AIF/AIFM structure benefits from a European passport, the distribution of the AIF needs to be carried out by a an appropriately licensed EU firm.

Fortunately, there are a number of services, both new and traditional, to bring relief to sponsors finding themselves in this unfortunate situation. The solutions can be characterized as follows:
1. Hire a third-party placement agent: tried and tested but expensive as a purely regulatory fix.
2. Set up a Tied Agent arrangement in an EU jurisdiction: this was the de facto go to solution for a while but recent regulatory scrutiny, suggests that it is at best a complex and temporary patch.
3. Delegate internal fundraising personnel to the host AIFM or appoint AIFM personnel to carry out the fundraising. Apart from employment and tax issues, such arrangements typically only work for limited scope fundraises (few investors/countries).
4. Appoint the EU based GP (typically in Luxembourg) as sub-distributor and appoint the (non-EU based) fundraising personnel to the board of the GP. Lawyers are split as to the legal basis of such an arrangement. Caveat emptor.
5. Delegated MIFID Distribution (DMD). A different approach offered by our MIFID licensed sister company FinDeal SA Luxembourg ( It works well for GPs wishing to delegate only the regulatory aspects of fundraising whilst retaining traditional IR and product specialist roles in-house. DMD is fast to set up and offers fixed pricing, independent of amounts raised. Contact [email protected] or [email protected] for further details.

And what about Switzerland’s new Financial Services Act (FinSA)? From this January, foreign financial service providers need to comply with a set of new marketing rules. Compliance is mandatory as soon as specific information about a financial instrument are provided to Swiss investors. Contrary to the EU however, full compliance is manageable thanks to several exemptions. In short, the type of investors targeted will determine the applicable regulatory obligations. The registration as “client advisors” in Switzerland will be required, for example, when marketing to HNWI or if you are not prudentially supervised. An affiliation with an ombudsman is also required in some instances.

European fundraising remains a piecemeal affair. There is no perfect solution and the best (least worst?) option depends in each instance on the set up and resources of the manager. Contact us to discuss your options, we are happy to help.