The Swiss financial market regulatory framework has undergone fundamental and comprehensive reforms over the past few years. The main purpose of these reforms is to harmonize Swiss regulations with existing and new EU regulations and to ensure access of Swiss financial institutions to the European market by fulfilling equivalence requirements. The most important parts of the reform package in terms of Swiss capital markets are set out in the new Financial Services Act (FinSA) and its implementing ordinance, the Financial Services Ordinance (FinSO), both of which entered into force on 1 January 2020 (subject to the phase-in of certain provisions as well as transition periods). 

By Philippe Weber / Christina Del Vecchio (Reference: CapLaw-2020-21)

1) Introduction

From 1 January 2020, FinSA (together with FinSO) introduced a new prospectus regime, including specific statutory requirements, for Swiss capital markets applicable to all financial instruments (subject to exemptions and customizations for certain financial instruments) where (i) any person in Switzerland who makes a public offer for the acquisition of securities or (ii) any person who seeks the admission of securities to trading on a trading venue in Switzerland must first publish a prospectus (article 35(1) FinSA). Perhaps most noteworthy, and unlike under the previous regime, any such prospectus must be submitted to a so-called reviewing body (a Reviewing Body) for approval prior to publication (i.e., ex-ante prospectus approval) (article 51(1) FinSA). Notably, for eligible debt securities, prospectus approval may be obtained after the publication of the prospectus (i.e., ex post prospectus approval).

On 28 May 2020, SIX Exchange Regulation AG (SIX Exchange Regulation) and BX Swiss AG (BX Swiss) announced the approval from FINMA to each act as a Reviewing Body under FinSA effective 1 June 2020. Thus, the respective prospectus review offices at SIX Exchange Regulation and BX Swiss are now accepting applications for the review and/or deposit of prospectuses pursuant to FinSA. However, according to FinSO, where a public offer is made or a request is made for admission to trading on a trading venue, the duty to publish a FinSA approved prospectus will only take effect as of 1 December 2020 (i.e., six months after the Reviewing Bodies were licensed by FINMA, article 108(1) FinSO). Until 1 December 2020, insofar as no prospectus in accordance with FinSA is produced, issuers may continue to comply with the previous regime, whereby a so-called offering and listing prospectus can be prepared in compliance with the Swiss Code of Obligations (CO) and/or the listing rules of the relevant exchange (as applicable)(article 109(2) FinSO). However, after the expiration of the six-month transition period, the obligation to publish a FinSA compliant prospectus will apply to all securities that are publicly offered in Switzerland or seek an admission to trading on a trading venue in Switzerland. 

Following their appointment as Reviewing Bodies, both SIX Exchange Regulation and BX Swiss have now published the respective rules, lists, directives as well as the fee schedules of their prospectus offices as contemplated by FinSA and FinSO. 

Importantly, according to article 72(5) FinSO, where FINMA grants a license to more than one Reviewing Body, it must ensure appropriate coordination of their practice. To this effect, the prospectus review offices of SIX Exchange Regulation and BX Swiss have coordinated a number of their directives and lists, including the approach to the review for coherence and understandability in prospectuses, the list of recognized jurisdictions and authorities, the list of recognized trading venues, accepted accounting standards and the directive on pro forma financial statements. The rules, lists, directives as well as the fee schedules of SIX Exchange Regulation and BX Swiss are available on their respective websites (see https://www.ser-ag.com/en/topics/reviewing-body.html and https://www.regservices.ch/en/regulations, respectively). 

It is worth highlighting that under the new prospectus regime introduced by FinSA and FinSO, the prospectus approval process and admission to trading on a Swiss trading venue generally consists of two parallel processes:

– prospectus approval pursuant to FinSA (i.e., by a Reviewing Body, such as SIX Exchange Regulation or BX Swiss; and subject to exemptions and customizations); and 

– application for the admission to trading on the relevant trading venue (i.e., by the exchange admission body, such as SIX Exchange Regulation). 

Following the introduction of the new prospectus regime, the Swiss stock exchanges have also amended their listing rules so that these two processes can operate in parallel. However, and perhaps most noteworthy, parties do not necessarily need to submit a prospectus for approval to the respective prospectus office of the trading venue that they may also be seeking admission to trading on. For example, the prospectus office of BX Swiss could approve a FinSA compliant prospectus for an issuer that is separately seeking an admission to trading on the SIX Swiss Exchange (via the application process with SIX Exchange Regulation) and vice versa. We expect that this will likely create some competition in the Swiss market between the two licensed Reviewing Bodies in relation to, among other considerations, speed, efficiency, and accessibility. Nevertheless, FINMA will need to ensure that their practices remain coordinated (see article 72(5) FinSO).

Below is a summary of selected key topics that FinSA and FinSO left to the Reviewing Bodies to further define that we believe are of particular interest (but, importantly, not an exhaustive guide to the prospectus approval process under FinSA and FinSO).

2) Review of Prospectuses and Supplements under FinSA / FinSO

a) Prospectus Review

According to article 51 FinSA, the Reviewing Body will check that applicable prospectuses are complete, coherent and understandable. While article 59 FinSO specifically provides that the review for “completeness” by the Reviewing Bodies will be limited to formal compliance with the content guidelines annexed to FinSO (which are largely based on the well-established content requirements (i.e., schemes) previously in place under the listing rules of the SIX Exchange Regulation (the SIX Listing Rules)), the new directives and lists published by SIX Exchange Regulation and BX Swiss have provided some additional guidance with regard to their review of prospectuses for “coherence” and “understandability”. 

Specifically, in connection with their review for “coherence”, the prospectus offices of SIX Exchange Regulation and BX Swiss will consider whether: (i) any risks mentioned in the summary are also included in the risk factors section; (ii) the information in the summary corresponds to the information in other sections of the prospectus; (iii) all amounts concerning the use of issue proceeds correspond with the amount of the expected proceeds from the offering; and (iv) the financial figures included in the prospectus match those in the financial statements appended to the prospectus. 

In addition, the prospectus offices of SIX Exchange Regulation and BX Swiss will check prospectuses for their “understandability”, considering whether: (i) the prospectus includes a clear and detailed table of contents; (ii) the prospectus is free from unnecessary repetitions; (iii) related information is grouped together; (iv) the prospectus uses a font size that is easy to read; (v) the prospectus is structured in a way that enables investors to understand the contents; (vi) the components of the mathematical formulas are defined in the prospectus; and (vii) the language in the prospectus is not deliberately misleading. 

b) Supplements not subject to approval

Generally, according to article 56(1) FinSA, a duty to publish a prospectus supplement is triggered by any new facts or circumstances that arise between the time of approval of the prospectus and the completion of the public offer or opening of trading on a trading venue that could have a significant influence on the assessment of the securities. As with prospectuses, in principle, supplements will also need to be reviewed and approved by the applicable Reviewing Body prior to publication as well as published in the same form as the approved prospectus (article 66(2) FinSO). In addition, as a general matter, after the publication of a supplement investors must be given the opportunity to withdraw their subscriptions or acquisitions (article 56(5) FinSA). 

However, to facilitate the timely publication of supplements relating to certain events, FinSA provides that the Reviewing Body shall maintain a list of facts that, by their nature, are not subject to review or approval by the Reviewing Body prior to publication (article 56(4) FinSA). To this end, both SIX Exchange Regulation and BX Swiss have issued a list of facts that may be addressed in a supplement that would not be subject to the review or approval by the Reviewing Body prior to publication (but, in any case, must be filed with the applicable Reviewing Body upon publication). 

In summary, the approach to supplements can be broadly categorized as follows:

– Pricing Supplements: Customary pricing supplements do not need to be reviewed or approved by a Reviewing Body prior to publication. Once the pricing details are ascertained, the issuer needs to file the supplement with the appropriate Reviewing Body upon publication. Pricing supplements do not trigger any additional obliga-tions with regard to the offering’s timeline.

– Supplements containing ad-hoc information: Generally, notifications to the market relating to the occurrence of new facts which, according to the rules of the respective Swiss or foreign trading venue, are made public and are possibly price-sensitive may be filed as a supplement not subject to review or approval by the applicable Reviewing Body. An analogous standard is applied for issuers whose securities are not (yet) admitted to trading. Excluded from this are announcements relating to published financial statements. Nevertheless, issuers are required to file the supplement with the appropriate Reviewing Body upon publication. Unlike with pricing supplements, though, such supplements do trigger additional obligations with regard to the offering’s timeline.

– All other new facts and circumstances: All other new facts and circumstances that could have a significant influence on the assessment of the securities as well as any announcements that could be classified as an ad hoc announcement that relate to published financial statements must be reviewed and approved by the applicable Reviewing Body prior to publication. In addition, such supplements do trigger additional obligations with regard to the offering’s timeline.

Each of these are discussed in a bit more detail below.

i. Pricing Supplements

Events contemplated by and disclosed in the prospectus or the final terms (e.g., approvals under company law or by the authorities, the stipulation of the price or volume of the securities offered or possible alternatives to a capital increase) do not trigger a duty to publish a supplement (article 63(2) FinSO) and, thus, do not require the review or approval of a Reviewing Body prior to publication or affect an offering’s timeline (as with prospectus supplements described in more below). Indeed, article 40(4) FinSA specifically states that if the final issue price and the issue volume cannot be stated in the prospectus, the prospectus must then indicate the maximum issue price and the criteria and conditions used to determine the issue volume. However, issuers need to file such information (i.e., the supplement) with the appropriate Reviewing Body upon publication. As such, both SIX Exchange Regulation and BX Swiss have indicated that supplements that include the final issue price and issue volume do not need to be approved by their respective prospectus offices prior to publication. 

ii. Prospectus Supplements

However, for facts and circumstances not contemplated by or disclosed in the prospectus that are capable of materially influencing average market participants investment decisions, a supplement to the prospectus must be immediately prepared and reported to the appropriate Reviewing Body (article 63(1) FinSO). 

To facilitate the timely publication of supplements relating to certain events, FinSA provides that the Reviewing Body shall maintain a list of facts that, by their nature, are not subject to prior approval by the Reviewing Body (article 56(4) FinSA). According to the rules of the respective prospectus offices of SIX Exchange Regulation and BX Swiss (subject to qualifications discussed below), notifications to the market relating to the occurrence of new facts which, according to the rules of the respective Swiss or foreign trading venue, are made public and are possibly price-sensitive may be filed as a supplement not subject to review or approval by the applicable prospectus office. Both SIX Exchange Regulation and BX Swiss also provide an analogous standard for issuers whose securities are not (yet) admitted to trading. 

However, SIX Exchange Regulation and BX Swiss have specifically excluded supplements relating to new facts that entail or result in changes to published annual, semi-annual or quarterly financial statements of the issuers concerned (despite such facts being also ad hoc relevant and possibly price sensitive). In such cases and in the case of all other supplements relating to new facts and circumstances that could have a significant influence on the assessment of the securities, the applicable Reviewing Body will then follow the review timelines stipulated in article 56(3) FinSA and article 65(2) FinSO with regard to approval and revisions of supplements. 

In each of the above described scenarios (i.e., other than upon publication of customary pricing supplements), following the publication of the prospectus supplement, (i) the offer period cannot end sooner than two (2) days after publication of the supplement (article 56(5) FinSA) or (ii) instead of extending the offer period, the issuer may, under the terms of the offer, grant investors the option to withdraw their subscriptions or acquisitions within two (2) days after the final completion of the public offer (article 63(5) FinSO).

c) Accounting Standards

According to article 51(2) FinSO, the Reviewing Body is also required to maintain and publish a list of accounting standards generally recognized by its prospectus office. In connection therewith, SIX Exchange Regulation and BX Swiss have each published consistent lists of recognized accounting standards that include (subject to certain conditions) Swiss GAAP FER, IFRS, US GAAP and EU-IFRS. Certain additional international accounting standards are permitted for debt securities, including, inter alia, Korean IFRS (K-IFRS), Hong Kong IFRS, International Public Sector Accounting Standards (IPSAS) along with several others. 

3) Approved Foreign Prospectuses Recognized in Switzerland

As a basic principle, the same rules apply to the public offering and listing of securities by domestic and foreign issuers in Switzerland. In addition, even though Switzerland is not part of the EU and cannot benefit from EU passporting rules, pursuant to article 54 FinSA and article 70 FinSO, certain prospectuses produced under foreign legislation may be approved by the Reviewing Body in Switzerland if they are drafted in accordance with international standards established by international organizations of securities regulators and the disclosure obligations are equivalent to the requirements under FinSA (in essence the information in the prospectus must comply in substance with the content of the applicable annexes pursuant to FinSO).

According to article 54(3) FinSA, the Reviewing Body shall publish a list of countries whose prospectus approvals are recognized in Switzerland. The Reviewing Body may also stipulate by which authority the approval needs to be issued. Notably, the prospectuses (and any accompanying supplement to such prospectuses) need to be in an official language of Switzerland or English (article 70(3) FinSO). 

As of 1 June 2020, the lists of SIX Exchange Regulation and BX Swiss include most major European countries, the United States and Australia. Importantly, no later than the beginning of the public offer or admission of the securities in question to trading, the prospectus must be (i) registered and filed with a Reviewing Body, (ii) published and (iii) made available on request free of charge in paper form (article 70(4) FinSO).

4) Procedure of the Reviewing Body and Suspension of Review Deadlines

The Reviewing Body follows the administrative procedures set out in Swiss administrative law (specifically, the Federal Act on Administrative Procedure of 20 December 1968 (the APA)). The APA provides for certain rights, including the right to inspect files, the right to be heard and judicial review. In addition, the calendar of the Reviewing Body may also follow the legal holidays stipulated in the APA, which differ from securities exchange trading days. 

However, in order to meet the demands of the capital markets, both SIX Exchange Regulation and BX Swiss have decided partially to forgo the suspension of deadlines according to the legal holidays stipulated in the APA. According to the currently available directives, during the review procedure of SIX Exchange Regulation (as of 1 June 2020), the deadlines for its prospectus office are suspended during the following days: (i) Good Friday and Easter Monday; (ii) August 1 (Swiss national day); (iii) from 24 December up to an including 26 December; and (iv) from 31 December up to and including 2 January. According to the directive of BX Swiss (as of 1 June 2020), the deadlines for its prospectus office are suspended during the following days: (i) Good Friday and Easter Monday; (ii) Whit Monday; (iii) from 25 December up to an including 26 December; and (iv) from 1 January up to and including 2 January. 

In light of the requirement under FinSO that Reviewing Bodies coordinate themselves in order to facilitate uniform market practice (article 72(5) FinSO), we expect that these dates will ultimately be aligned and will largely track the Swiss securities trading calendar. 

5) Recognized Foreign Trading Venues

According to article 48(3) FinSO, the Reviewing Body shall maintain and publish a list of foreign trading venues recognized by it or of the recognized trading segments of such foreign trading venues. The purpose of such recognition relates most significantly to exemptions from the duty to publish a prospectus in case of certain admissions to trading in Switzerland (see article 38(1)(c) FinSA) and certain relaxation requirements from the duty to publish a prospectus and supplement (see article 47(2)(c) FinSA). As of 1 June 2020, the lists of SIX Exchange Regulation and BX Swiss include selected trading venues across Europe, the United States, Australia, Hong Kong and China.

6) Pro-Forma Financial Information

As contemplated by FinSO, SIX Exchange Regulation and BX Swiss have also provided guidelines (in the form of directives) on the disclosure requirements around pro-forma financial information. The directives of SIX Exchange Regulations and BX Swiss largely follow the previous practice under the SIX Listing Rules (which prior to the reforms introduced by FinSA/FinSO had also published an analogous directive addressing additional financial disclosure in connection with issuers that had a complex financial history). In light of this, we are of the view that there should not be too many surprises for market participants in this regard.

In brief, in the event the issuer has made or is planning to make significant changes to its structure, depending on the scope of the structural change (as calculated based on the formulas provided in the respective directives), SIX Exchange Regulation and BX Swiss may require additional financial statements to be published in the prospectus in order to provide investors with a transparent understanding of the issuer’s financial situation. Structural changes can include corporate reorganizations, spin-offs, mergers or acquisitions. Additional financial statements may include, subject to exemptions, combined financial statements, carve-out financial statements and/or pro forma financial statements. 

7) Fee Schedule

In addition to the topics discussed above, SIX Exchange Regulation and BX Swiss have also published their respective fee schedules and policies in accordance with the scale of fees for rulings and services under article 79 FinSO and annex 8 thereto. Notably, both SIX Exchange Regulation and BX Swiss will charge additional fees of up to 50% of the ordinary fee for rulings and services provided urgently or outside normal working hours upon request (article 79(6) FinSO). However, at least according to the rules of BX Swiss, there is no entitlement for the prospectus office to review a prospectus within a shortened period. Furthermore, each of SIX Exchange Regulation and BX Swiss charge additional fees in the case of physical filings. In light of this, it is advisable for parties who will likely be using the services of the respective prospectus offices to establish a user account for their company or firm in advance, as there may certain administrative steps involved. 

8) Conclusion

As noted above, Switzerland’s financial market regulatory framework has undergone fundamental and comprehensive reforms over the past few years. While we believe that the new prospectus regime introduced by FinSA and FinSO will positively impact the Swiss capital markets in the long-run, it remains to be seen how many of the new novelties, including the prospectus approval process by the Reviewing Body under FinSA, will work in practice.

Philippe Weber (philippe.a.weber@nkf.ch)
Christina Del Vecchio (christina.delvecchio@nkf.ch)