On 15 June 2018, the Swiss parliament adopted the Swiss Financial Services Act (FinSA) and the Swiss Financial Institutions Act (FinIA). On 24 October 2018, the Swiss Federal Council opened a consultation process regarding the three ordinances implementing these acts, the Financial Services Ordinance (FinSO), the Financial Institutions Ordinance (FinIO) and the Supervisory Organisation Ordinance (SOO), which will last until 6 February 2019. The two acts are expected to enter into force together with the ordinances on 1 January 2020 and will introduce an entirely new regulatory framework governing the Swiss financial markets. Among other provisions, FinSA provides for a general obligation to prepare a prospectus in connection with public offerings of securities and their admission to trading on a trading venue as well as for an ex ante review and approval process by a Review Board. It also provides for an obligation to prepare a key information document in connection with the offering of certain financial instruments to retail investors.
New Duty to Prepare and Obtain Approval of Prospectuses
Until now, Swiss prospectus requirements were incomplete and partially outdated. The duty to prepare an issuance prospectus was based on private law rules in the Swiss Code of Obligations and was not enforced by a public authority. Except for issuers listed at Swiss stock exchanges, there was no obligation to file or obtain the approval for a prospectus under Swiss law. FinSA takes on the model of the EU-Prospectus Regulation and introduces into Swiss law a regulatory obligation to prepare a prospectus in connection with any public offering of securities or the admission of securities to trading on a trading venue. This entails a radical change in the Swiss regulatory regime, where securities offerings were previously only subject to limited disclosure requirements in connection with the issuance of new securities and more extensive ones applying to a listing in Switzerland. Under the new regime, all prospectuses will be subject to an approval process, carried out ex ante, as a rule, under a new regulatory body, the Review Board (Prüfstelle), which will review them for formal completeness, consistency and clarity.
Scope and Exemptions
The obligation to prepare a prospectus will be triggered by a public offering to subscribe or purchase securities as well as by the admission to trading of securities on a Swiss trading venue. It will therefore cover both primary and secondary market offerings and will apply not only to the issuer but to any person who makes a public offer or seeks the admission to trading of a security. From a territorial perspective, only public offerings in Switzerland and admission to trading on a Swiss trading venue will be subject to the act. In contrast, foreign offerings will not be subject to this obligation, even if they relate to securities issued by Swiss issuers.
The term 'offer' is defined in FinSA to include any invitation to acquire financial instruments that includes sufficient information on the terms of the offering and the financial instrument. This definition also includes the transmission of offers, but will not extend to inquiries around a general investor interest in a security, through pre-sounding or 'testing the water'. The legislative material and the draft FinSO suggest that the term 'public offering' should be construed broadly. Any offer to an undetermined circle of persons will be deemed to be a public offering.
The obligation to prepare a prospectus will be subject to various exemptions modelled to a large extent on the EU Prospectus Regulation. Among others, public offers
- to professional investors,
- to fewer than 500 investors,
- to investors who acquire securities for a consideration in excess of CHF 100,000
- for securities with a denomination of more than CHF 100,000 or
- raising less than CHF 8 million in total over a period of twelve months
will be exempt from the obligation to prepare a prospectus.
Similarly, various types of transactions with securities will be exempt from the obligation to issue a prospectus. This includes, among others, securities offered in connection with the exercise of options or conversion rights, securities offered to directors, executive management or employees, or stock dividends. Also securities offered or issued in connection with public takeovers, and various corporate transactions (e.g. mergers, spin-offs) are exempted, provided information that is equivalent to that required for a prospectus is available.
Furthermore, the FinSA provides for exemptions relating to the admission of trading for securities that are already admitted to trading on another trading venue in Switzerland or on a recognized foreign trading venue which is subject to appropriate regulation, supervision and transparency. Exemptions also apply to the admission of new securities of the same type as already admitted securities (i) of less than 20% 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.
Content of the Prospectus
In line with EU law and, to a large extent, the rules of the SIX Swiss Exchange, but marking a departure from the outdated rules of the Swiss Code of Obligations, FinSA provides that the prospectus must include information on:
- the issuer, including its board, management, auditor and any other relevant body, the financial statements, and important prospects, risks and litigation;
- the securities, namely the rights, obligations and risks associated with them, and;
- the offering, including the placement and the estimated proceeds.
Furthermore, FinSA will require issuers to prepare a summary.
In this context, the draft FinSO includes five schedules detailing the minimum requirements concerning the content of the prospectus.
FinSA allows prospectuses to be issued in several parts, namely a registration document, a description of the securities and a summary. Furthermore, issuers, including banks and securities firms, will be allowed to issue securities under an offering program, based on a base prospectus that will be completed later with final terms.
To view the full article please click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.