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SWITZERLAND FEDERAL FINANCIAL SERVICES ACT (FFSA) - Enforcement of Clients' Rights Background With the Federal Financial Services Act, also known as “FIDLEG” (hereinafter “FFSA”) which is planned to enter into force in 2017 and constitutes the Swiss Regulator’s response to MiFID II, client protection is to be strengthened through various measures ap- plicable to the Swiss and foreign financial services providers acting in Switzerland. Indeed, the im- provement of legal protection is a key objective of the preliminary draft for the FFSA, hence it contains an own chapter dedicated to the private enforce- ment of rights (Title 4 of the FFSA consultation draft, i.e. art. 72-116). What’s in there? The FFSA explanatory report identifies significant lacks in the current law with regards to the private enforcement of clients’ rights. Namely: « Injured clients can often not prove the financial service providers’ breach of duties; « Furthermore, it shows a structural discrepancy with regards to the costs of proceedings and the connected financial risks; « Finally, there are currently no instruments in place for collective compensation which would allow for a common judicial handling of various similar claims. In order to cover those deficits, the preliminary draft proposes the following measures: « New rules concerning the disclosure obligation, i.e. to provide the client with documents created by the financial service providers; « Dual reversal of the burden of proof, the client does no longer bear solely the burden of proof; « Reinforcement of the mediation body (ombuds- man system without decision authority), where the financial services providers have an obliga- tion to participate; « Introduction of two alternative solutions for dis- putes against financial service providers, either a permanent arbitral tribunal or a litigation fund sponsored by financial service providers; « Introduction of two dedicated instruments of col- lective recovery, either the representative action by interest groups, or collective settlement pro- ceedings.

The securitization vehicles that do not meet the characteristics of the “anti-bypassing” decree (see below) and submitted to provisions of Article L 214- 167 of the CMF must have a custodian meeting the requirements of a UCITS custodian (new writing of Article 323-1 A of the CMF). ORDER OF OCTOBER 28TH 2014 Securitization instruments covered by the common provisions of AIF Background In accordance with Article L.214-24 I and II of the CMF, securitization instruments are considered as AIFs. However, according to Article L.214-167 of the CMF, common provisions applicable to AIFs do not apply to securitization instruments, in particular with respect to the following instruments: « Securitization instruments establishing one or several securitization transactions, « Instruments issuing debt securities within the framework of a commercial paper backed to assets. What’s in there? On November 16th, 2014 was published in the JORF the n° 2014-1366 Decree of November 14 th 2014 issued pursuant to Article L.214-167 II of the CMF. This Decree aims at preventing “bypassing” of the AIFM Directive by funds taking the form of « Funds of lending to the economy,

securitization instruments, then benefiting from the exemption of AIFs' specific provisions, while adopting identical investment strategies as AIFs - which are subject by nature to all the AIFM Di- rective requirements. AIFs common rules apply to securitization instru- ments which are exposed, in a proportion superior to 50% of the assets of the instrument, to the fol- lowing risks: « Any other asset which does not constitute an in- surance or credit risk exposure as long as these titles or assets are discretionarily managed by the management company, or take the form of financial agreements which are discretionarily concluded, managed or canceled by the manage- ment company. For calculation of the 50% percentage, considera- tion is given to the direct or indirect exposures of the securitization instruments, including any third entity. « Financial titles; However, are not taken into account for the cal- culation: « Temporary and accessory purchase and detention of liquid assets and of parts or shares of monetary short-term UCITS or AIFs; « Any financial agreement concluded for hedging purposes. What’s next? This text entered into force the day after its pub- lication and applies to securitization instruments created as from this date. It also applies to securiti- zation instruments whose rules or status have been modified to proceed to substantial changes in their investment strategy as from this date. « Temporary detention of debts;

DECREE N 2014-1366 OF NOVEMBER 14TH, 2014

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