In response to the growing trend of sustainability reporting as an additional component of annual reporting, the Regulatory Board of the SIX Swiss Exchange has decided to issue new regulations regarding sustainability reporting. In addition, new disclosure rules have been adapted for publicly disclosed buyback programmes, redemption of own units by real estate funds and net asset value disclosure by collective investment schemes. The changes will enter into force on 1 July 2017.

By Adam El-Hakim (Reference: CapLaw-2017-28)

1) Adaption of the Directive on Information relating to Corporate Governance (DCG)

By way of opting in, issuers now have the opportunity (but not the obligation) to inform SIX Exchange Regulation (SIX) that they issue a sustainability report in accordance with internationally recognized standards (article 9 DCG in conjunction with article 9 item 2.03 DRRO) (Opting In). Such standards are updated periodically by SIX to take account of international developments. The fact that an issuer is Opting In will get published by SIX on the SIX website for the purpose of informing market participants. This can be viewed as a “quality label”. Issuers choosing an Opting In are required to publish the sustainability report on their website within eight months of the balance sheet date for the annual financial statements. Further, the report must remain available in electronic form on the issuer’s website for five years from the date of publication.

However companies remain free not to choose an Opting In and to (i) issue and publish a sustainability report in line with an internationally recognized standard without reporting this to SIX or (ii) include certain sustainability topics in their annual report.

2) Adaption of the Directive on Regular Reporting Obligations for Issuers of Equity Securities, Bonds, Conversion Rights, Derivatives and Collective Investment Schemes (DRRO)

Once the above mentioned Opting In regarding sustainability reporting is adopted, it takes the form of a new regular reporting obligation (article 9 item 2.03 DRRO), whereas the Opting In as such remains, as mentioned above, entirely voluntary for issuers.

Provisions within the Financial Market Infrastructure Act (FMIA) as well as in the Financial Market Infrastructure Ordinance (FMIO) restrict the permissibility of buybacks insofar as such buybacks may generally not be carried out during black-out periods. However, exceptions in the form of safe-harbour rules exist. For example in case of a postponement of disclosure (pursuant to article 54 SIX Listing Rules), buybacks made at market price are permissible as long as they are (i) undertaken by a securities dealer commissioned for this purpose prior to the start of the buyback programme and (ii) carried out by the securities dealer within the parameters originally prescribed by the issuer without the issuer having any further influence (article 124 (2) (a) FMIO). The buyback is also permitted during a black-out period if it is undertaken by a trading unit segregated with information barriers, insofar the issuer itself is a securities dealer (article 124 (2) (b) FMIO).

The Swiss Financial Market Supervisory Authority wants SIX to strengthen the monitoring of compliance regarding such regulations on publicly disclosed buyback programmes. Therefore, SIX will foster increased contact with issuers publicly disclosing aforesaid buyback programmes. A new regular reporting obligation has therefore been introduced to reduce unnecessary requests. It obliges issuers with publicly disclosed buyback programmes to inform SIX about the buyback programme undertaken during a black-out period by an independent securities dealer or a trading unit (in the meaning of article 124 (2) (a) and (b) FMIO (article 9 item 1.11 DRRO)). Further, SIX must be informed if the requirements set out in article 124 (2) (a) and (b) FMIO are no longer met.

In the cases where a real estate fund (open-ended collective investment scheme) redeems its own units, the issuer is obliged to report this to SIX so that the corresponding changes – in particular in the relevant index – can be made (article 12 item 2.06 and article 13 item 2.05 DRRO).

The current regulations require issuers with collective investment schemes to report the official net asset value (NAV; article 83 of the Collective Investment Schemes Act) and, where applicable, the indicative NAV of exchange-traded funds to SIX. As SIX does not publish these key figures on its website, the decision has been taken to waive henceforth this reporting obligation. The corresponding provisions of the DRRO (article 12 item 2.01 et seq. and article 13 item 2.01 et seq. DRRO) are therefore repealed.

Adam El-Hakim (adam.el-hakim@baerkarrer.ch)