Under the Swiss passporting regime for foreign prospectuses, eligible foreign prospectuses and base prospectuses may be used for securities offerings in Switzerland without a Swiss approval process. This passporting regime, often referred to as “automatic prospectus approval“, constitutes an attractive alternative for accessing the Swiss market. Drawing on five years of practical experience, this article provides a practical guide to the Swiss passporting regime for foreign prospectuses.
1) Introduction
In 2020, Switzerland has aligned its prospectus regime with a modern framework modeled on the EU Prospectus Regulation (EU) 2017/1129 through the Financial Services Act (FinSA). Under this new prospectus regime, any offer of securities to the public in Switzerland and any admission of securities to trading on a Swiss trading venue requires a prospectus that has been prepared, approved and published in accordance with FinSA, subject to certain exemptions.
As an alternative to a prospectus approved in Switzerland, FinSA also introduced a passporting regime for foreign prospectuses and base prospectuses that have been approved by the authorities of certain eligible jurisdictions. According to the legislative materials, the passporting regime aims at avoiding practical issues in international securities offerings, and should apply to prospectuses of jurisdictions that offer a comparable level of transparency as offered under the Swiss prospectus rules.
This practical guide outlines the requirements and practical implications for using the Swiss passporting regime for foreign prospectuses.
2) Passporting requirements for foreign prospectuses
a) Eligible jurisdictions, required foreign approval and language
Swiss prospectus review bodies (each a Review Body) may define that prospectuses approved in specified jurisdictions qualify for passporting (article 54(2) FinSA), and may publish lists of these eligible jurisdictions (article 54(3) FinSA).
The two existing Review Bodies of SIX Exchange Regulation AG and BX Swiss AG have defined such eligible jurisdictions in identical lists which currently include all member states of the European Economic Area (EEA), the United Kingdom (UK), the USA, and Australia as eligible jurisdictions. For the EEA member states and the UK, the lists explicitly state that standard prospectuses and base prospectuses are eligible, provided that they have been approved for all investor categories. This limitation excludes prospectuses that are limited to certain investor categories, e.g. wholesale prospectuses, as well as prospectuses with a specific purpose such as simplified prospectuses for secondary issuances and EU growth prospectuses. For the USA and Australia, the lists do not further specify eligible prospectus types, i.e. all prospectuses relating to single issuances and “base“ prospectuses allowing for multiple issuances (e.g. universal shelf registrations in the USA) that have been approved in the USA and Australia are eligible for passporting into Switzerland. While the passporting of prospectuses approved within EEA member states and the UK has become common practice, only few US or Australian prospectuses have been passported.
Prospectuses or base prospectuses that are approved by the competent authorities of eligible jurisdictions are eligible for passporting if they were drafted in English, German, French or Italian (article 70(3) of the Financial Services Ordinance (FinSO)).
b) Filling, registration and accessibility in Switzerland
To make use of the passporting, an eligible foreign prospectus or base prospectus must be:
i. filed with a Review Body,
ii. registered in the official list of approved prospectuses of the relevant Review Body (see section 3) below),
iii. published, and
iv. made available free of charge in paper form upon request (article 70(4) FinSO).
These requirements aim at ensuring investor accessibility in accordance with the Swiss market standards as established under FinSA. Therefore, a passported prospectus or base prospectus must be published in accordance with the requirements defined in article 64 FinSA (e.g. (i) by electronic publication on the website of the issuer, guarantor, trading venue, or the institution involved in the issue, or (ii) by distributing print copies at the offices of the issuer or the institution involved in the issue).
c) Requirement for Swiss specific additions?
Neither FinSA nor FinSO stipulate requirements regarding the content of a foreign prospectus or base prospectus that is eligible for passporting. This means that the content and approval requirements are exclusively governed by the applicable foreign regulations.
In practice, however, it is advisable to include information on Swiss selling restrictions and the applicable Swiss taxation. The Swiss selling restrictions should reflect the passporting process that is a condition for any public offer or admission to trading in Switzerland.
d) Swiss registration requirement for final terms or pricing supplements
For securities issued under a foreign base prospectus that has been passported into Switzerland, the requirements regarding the availability and registration of final terms or pricing supplement setting forth the terms of the relevant issuance pursuant to article 45(3) and (4) FinSA apply as a result of passporting the foreign base prospectus into Switzerland.
Therefore, at least indicative terms of an issuance must be available at the start of a public offer in Switzerland in the form of indicative final terms or a pricing supplement. Additionally, the applicable terms of an issuance must be published in final terms or a pricing supplement that must be registered with a Review Body as soon as the issuance terms are available after the offer period. For securities that are admitted to trading on a trading venue in Switzerland, this must be done by the time of admission to trading.
In addition, all requirements applying under the applicable foreign regulations relating to the relevant final terms or pricing supplement (e.g. any registration or filing obligations with a foreign authority and publication requirements) must be complied with.
3) Practical considerations for the registration procedure with Review Bodies
Passporting an eligible foreign prospectus requires the registration of the passported prospectus or base prospectus with a Review Body. To this end, the issuer or its representative has to upload the relevant prospectus or base prospectus together with the approval decision and all documents incorporated by reference onto the electronic platform of a Review Body. The relevant Review Body‘s role is limited to verifying the completeness and authenticity of these registration documents, rather than conducting a substantive review of the content of the prospectus or the base prospectus. This verification process generally takes a few business days after which the Review Body will proceed with the registration. In addition, for any issuance documented under a passported base prospectus, the relevant final terms or pricing supplement documenting an issuance must be uploaded onto the electronic platform of a Review Body (see section 2d) above).
For time-critical transactions involving a public offer or an admission to trading in Switzerland that needs to take place at a specific date or upon occurrence of a specific event, it is advisable to engage in an early dialogue with the Review Body to coordinate the registration process and the registration date. This coordination is in practice of particular relevance for foreign prospectuses relating to equity securities of companies with a dual-listing in Switzerland and abroad. Such prospectuses must typically be passported on the same day as their foreign approval date in order to align the initiation of a public offer and admission to trading in Switzerland and abroad.
4) Conclusion, strategic implications and alternatives
Despite often being referred to as “automatic approval“, the Swiss passporting regime for foreign prospectuses and base prospectuses involves a registration process in Switzerland that usually takes a few days to be completed. In transactions where timely passporting is required, the timing of the registration procedure has to be discussed and coordinated in advance with the relevant Review Body.
Moreover, issuers should verify early-on if, in addition to meeting the Swiss requirements, a passporting into Switzerland is permitted under the foreign regulations. In practice, the passporting of a prospectus or base prospectus into Switzerland may be restricted by foreign regulations and the practice of foreign authorities.
If a passporting into Switzerland is not possible or is deemed impracticable, a pragmatic alternative is using the available foreign prospectus or base prospectus together with the final terms or a pricing supplement relating to an issuance as a foundation of a Swiss prospectus. In such constellations, the Swiss prospectus typically consists of a brief “Swiss wrapper“ setting out the Swiss-specific disclosures required by FinSA and FinSO that are missing in the foreign product documentation that is annexed to, or incorporated by reference into, the “Swiss wrapper“. This approach requires an approval of the Swiss prospectus by a Review Body. For certain debt securities, this approval may also be obtained after the public offer and admission to trading in Switzerland by relying on the ex post prospectus approval regime (article 51(2) FinSA). This ex post prospectus approval regime ensures a short time-to-market period in Switzerland for eligible debt securities issuances.
Finally, the passporting regime is non-reciprocal, i.e. Swiss prospectuses approved in Switzerland may not be passported into EEA member states, the UK, the USA or Australia. This showcases the liberal regulatory approach taken in Switzerland that contrasts with the more protectionist approach prevailing in many other jurisdictions.
Fabio Elsener (fabio.elsener@swlegal.ch)