Switzerland is introducing a new prospectus regime which enters into force on 1 January 2020 with a phase-in period of at least nine months as part of the new Financial Services Act (FinSA; Finanzdienstleistungsgesetz; FIDLEG).
The new regime is largely modeled along the EU Prospectus Regulation framework. It provides for a detailed set of rules for public offerings including the introduction of a regulatory body to review and approve offering prospectuses. Up until now, Switzerland – unlike all EU and EEA countries – did not have a regulatory body overseeing public offerings. Overall, the regime aims to enhance transparency and legal certainty for issuers.
In this context, there are a few fundamental novelties a candidate for an initial public offering (IPO) needs to know as new and more disclosure and approval requirements for public offerings will be introduced. However, the rules and exemptions provided under the new regime ensure to a large extent that the additional burden for IPO candidates will remain commensurate and strive to keep a sufficient degree of flexibility in order for the Swiss stock exchange to remain an attractive venue for listings.
Ex-Ante Approval of Prospectuses
Up to now, there are only limited requirements in the case of public offerings and the current regime does not require offering prospectuses to be filed with, or approved by, any reviewing body in Switzerland. Only in the case of a listing in Switzerland, e.g. on the Swiss stock exchange operated by SIX, an approval requirement by the relevant stock exchanges' authority (SIX Exchange Regulation) as the competent self-regulatory body applies.
Under the new regime, all prospectuses will be subject to an approval process, carried out ex-ante, as a rule, by a new regulatory body, the Review Board ("Prüfstelle"), which will review the prospectus for formal completeness, consistency and clarity.
"The new prospectus regime in Switzerland introduces, in our view, a modern and practical prospectus framework that will enhance transparency and establish a level playing field with corresponding EU prospectus regulations while keeping a sufficient degree of flexibility for issuers making the Swiss stock exchange an ideal listing venue for an IPO candidate."
First-time issuers will be required to submit the prospectus for approval well in advance to account for the Review Board's review period of 20 calendar days (for all other issuers, the review period amounts to 10 calendar days). Within such review period, the Review Board will approve the prospectus or ask for a revision. In case of the latter, the applicable period may start from scratch after re-submission of the revised prospectus to the Review Board.
An IPO candidate needs to know that the planning and timing of an IPO needs to be more careful and diligent given that a prospectus needs to be approved and might need to be re-submitted triggering a restart of the applicable period.
Exemptions to Publish a Prospectus
The obligation to prepare a prospectus will be subject to various exemptions modelled to a large extent along the EU Prospectus Regulation. The set of exemptions, among others, will include offerings that:
- are limited to professional investors; or
- are addressed to less than 500 investors; or
- are addressed to investors who acquire securities for a consideration in excess of CHF 100,000; or
- raise less than CHF 8 million (in total over a period of 12 months)
An IPO candidate needs to know that it hardly benefits from any of the above exemptions in the context of a customary IPO alongside a listing on a Swiss stock exchange.
What is the definition of a "professional investor" under the FinSA in Switzerland?
Professional investors are defined as: (1) financial intermediaries in the meaning of the Banking Act (BankA), the Collective Investment Schemes Act (CISA) and the Financial Institutions Act (FinIA), (2) Swiss regulated insurance institutions, (3) foreign financial intermediaries and insurance institutions subject to a prudential supervision, (4) central banks, (5) public entities with professional treasury operations, (6) pension funds with professional treasury operations, (7) companies with professional treasury operations, (8) large companies that reach at least two of the following thresholds (balance sheet of CHF 20 million, turnover of CHF 40 million or equity of CHF 2 million), and (9) private investment structures with professional treasury operations set up for high net worth individuals. In addition, certain high net worth individuals have the ability to request to be treated as professional clients (opting-out).
Furthermore, the new regime provides for exemptions e.g. relating to the admission of trading for securities that are already admitted to trading on a recognized foreign trading venue which is subject to appropriate regulation, supervision and transparency. For already listed companies, further exemptions to publish a prospectus apply e.g. to the admission of new securities of the same type as already admitted securities (i) of less than 20% of that respective security type outstanding during twelve months or (ii) issued in connection with the conversion of exchange of financial instruments or the exercise of rights related to such instruments.
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