The Financial Services Act and its implementing ordinance require prospectuses to be supplemented in case a new price-sensitive fact has arisen between the time of approval of the prospectus and final completion of a public offer or opening of trading on a trading venue. Such supplements have to be approved by the competent Reviewing Body, unless the information containing the price-sensitive fact is included in an ad hoc notice, in which case the supplement can be merely filed with the Reviewing Body without approval. The revision of the ad hoc rules per 1 July 2021 abolished the per se reportable facts, which has an impact on issuers dealing with certain price-sensitive information prior or around the time of an issuance of securities.
By René Bösch / Benjamin Leisinger (Reference: CapLaw-2021-60)
1) Duty to Supplement Approved Prospectuses
According to article 56 of the Financial Service Act (FinSA), a supplement to a prospectus must be prepared if any new facts arise, or are established, between the time of approval of such prospectus and final completion of a public offer or opening of trading on a trading venue, as applicable, which could have a significant influence on the assessment of the price of the securities offered or admitted to trading. Such supplement must be filed for approval with the Reviewing Body that has already approved the prospectus immediately upon occurrence or establishment of the new fact. After review and approval of the supplement by the Reviewing Body the supplement must be published immediately. The time for review and approval by the Review Board may be up to seven calendar days.
Events already included or envisaged in the prospectus or in the final terms, such as required approvals under applicable company law or by certain authorities, the stipulation of the price or the volume of the securities offered or possible alternatives to a capital increase, do not trigger a duty to publish a supplement. The duty to supplement a prospectus is triggered by facts which, taking the concrete circumstances of the particular case into account, are capable of materially influencing the average market participant in their investment decision (article 63(1) of the Financial Services Ordinance (FinSO)). This is a standard that is comparable to the standard under the listing rules of the SIX Swiss Exchange (Article 53 SIX Listing Rules) or the BX Swiss (Clause 16 BX Listing Rules) for ad hoc notices.
2) Approval vs. Mere Filing of Supplements
Certain supplements do not have to be reviewed and approved by, but can be merely filed with, the Reviewing Body to be effective. Specifically, notifications of facts which, according to the rules of the respective Swiss or foreign trading venue or DLT trading facility are made public and are possibly price-sensitive, may be reported as a supplement without approval (article 63(4) FinSO). Such a supplement has to be published at the same time as the report is made to the competent Reviewing Body.
The Reviewing Bodies maintain and publish a list of facts which by their nature are not subject to approval (see in more detail CapLaw-2020-21). In line with the FinSO, the current list mentions (i) final issue price and issue volume and (ii) 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 – this does not include new facts that entail or result in changes to published annual, semi-annual or quarterly financial statements of the companies concerned. Both SIX Exchange Regulation and BX Swiss also provide an analogous standard for issuers whose securities are not (yet) admitted to trading.
3) Revised Ad Hoc Regime
Effective 1 July 2021, the SIX Swiss Exchange revised its Listing Rules, specifically its ad hoc regulations in article 53 Listing Rules and the Directive on Ad hoc Publicity (for more information, see CapLaw-2021-48). One of the new features of the revised rules is that, with the exception of financial statements, it abolishes the previously known per se ad hoc facts. Under the former ad hoc rules, certain fact patterns were per se reportable by ad hoc releases, including in particular changes in the board of directors or executive management.
Under the new ad hoc rules, ad hoc notices only are required if the new fact is price-sensitive, i.e. if its disclosure is capable of triggering a significant (considerably greater than the usual price fluctuation) change in market prices, without listing per se reportable fact patterns. Such notices must also be flagged as ad hoc notices. It is explicitly prohibited to report and flag a notice that is purely of a marketing nature as an ad hoc announcement; misuse of flagging may be sanctioned. Issuers, however, still have a certain discretion in reaching a determination on whether a fact is price-sensitive and still can, in doubt, apply a cautious standard, err in favor of disclosure and flagging the announcement, without being sanctioned for wrongly applying the flag (see CapLaw-2021-48).
4) Impact of revised Ad Hoc Regime on Form of Supplements
The possibility to simply report ad hoc notices as a prospectus supplement under the FinSA/FinSO may also have a certain effect on the determination whether to publish and flag a specific report as ad hoc. Issuers may wish to determine whether or not to file a change in the composition of the board of directors or the executive committee by way of an ad hoc release rather than a simple news release to benefit from the exemption to have a supplement to the prospectus reviewed and approved, a determination which may be highly relevant around the time of a planned or already announced issuance of securities.
However, such decision should take into account two considerations: (1) As mentioned, it is not permissible to report all new facts by way of ad hoc notices; rather, such facts need to be price-sensitive; (2) the Reviewing Bodies have established a practice to accept a number of other supplements that are not subject to approval – their list (see above at 2)) is not exhaustive. They have done so in consideration that it is impossible to examine certain facts by their very nature for completeness. For example, a mere resignation of a member of the executive management or the board of directors, or new key financial figures should not be subject to approval if filed as a supplement – even if they are not price-sensitive in the specific case and, therefore, not published as an ad hoc release. In such a case, it may be best to include the new press release in the prospectus as an additional document incorporated by reference.
In summary, the question of whether a press release should be published (and flagged) as an ad hoc notice should be answered based on an interplay of its price-sensitivity and the possibility to use it as a supplement for prospectuses without review and approval by a Reviewing Body. Issuers continue to have a certain discretion, but must bear in mind that mere marketing notices must not be published as an ad hoc statement (and may not be the best standard for disclosure in a prospectus, either).
René Bösch (rene.boesch@homburger.ch)
Benjamin Leisinger (benjamin.leisinger@homburger.ch)