The relevant institutions behind a fund are the fund management company – in other words the company which manages the fund – on one hand and the custodian bank, on the other, which holds the fund management company’s assets in the form of securities and liquidity. The custodian bank controls the fund management company. It also carries out the transfers when executing securities transactions.
How your money in the investment fund is protected in the event of extreme events
The economy has always gone up and down. This makes it all the more important to know which laws and regulations you as an investor can rely upon in the event of bankruptcy or other extreme events. We answer the key questions in relation to Switzerland.
What happens to my money if …
…the custodian bank goes into bankruptcy?
Under the The link will open in a new window Banking Act, all custody account assets must be set aside. This means the securities which the custodian bank holds for the fund concerned are not part of the bankruptcy estate, but are instead owed to you as the investor. They are then transferred to a different custodian bank.
…the fund management company goes into bankruptcy?
If the company managing your fund unexpectedly goes into bankruptcy, the investors’ assets are set aside in accordance with the Federal Act on Collective Investment Schemes (The link will open in a new window CISA). This means that in this case too your assets are not included in the bankruptcy estate but are instead still owed to you.
…a company whose shares are part of my investment fund goes into bankruptcy?
If a company goes into bankruptcy, its shares are also affected and lose value. The company’s debt is recoverable and is paid out in a defined order. In this respect, it should be noted that shares are part of the company’s equity. This means that shareholders are only taken into account after all creditors and usually end up empty-handed in the event of bankruptcy. Above all, it’s important to know that investors in collective investment schemes are protected by various laws and regulations. Mandatory publications are also issued on every fund containing details of risks and costs, such as the Key Information Document (PRIIP KID), which are available from your fund provider. Read these and any other information provided by your bank on investment funds very carefully. Your advisor will be pleased to provide you with further information on any questions you may have.