Back to Securities Law Committee publications

Benjamin Leisinger
Homburger, Zurich
benjamin.leisinger@homburger.ch

(with contributions by Credit Suisse; UBS; Zürcher Kantonalbank; Baker McKenzie; Bär & Karrer AG; Homburger AG; Lenz & Staehelin; Niederer Kraft Frey AG; Pestalozzi Rechtsanwälte AG; Schellenberg Wittmer AG; and Walder Wyss AG)

I. Overview of the new Swiss prospectus regime

On 1 January 2020, the new Financial Services Act (FinSA) and its implementing ordinance, the Financial Services Ordinance (the FinSO), which govern the prerequisites for providing financial services and offering financial instruments in Switzerland, entered into force. As part of this new legal framework, the FinSA introduces for the first time in Switzerland a comprehensive prospectus regime for the public offering of securities. This new prospectus regime establishes, among other things, uniform rules on:

• what constitutes a public offering;
• when a prospectus will be required;
• the exemptions to the requirement to prepare a prospectus and have it approved; and
• the requirements as to form and publication of prospectuses.

In an additional first for the Swiss capital market, the FinSA establishes certain supervisory and administrative roles as part of the prospectus regime, which will be carried out by one or more new Swiss bodies (the review bodies) licensed by the Swiss Financial Market Supervisory Authority (FINMA). As a result, although the FinSA and the FinSO have entered into force, a grace period for compliance with the prospectus regime is currently in effect that will expire the later of either:

• six months from the date on which the first review body receives its licence; or
• 1 October 2020.

The FinSA prohibits the public offering¹, or application for admission to trading on a trading venue in Switzerland, of shares, bonds, structured products and other financial instruments (as defined therein) in the form of securities, unless:

• a prospectus has been prepared, approved by a review body and published in accordance with the requirements of the FinSA prior to commencement of such offering or admission to trading;
• a prospectus has been:
  • prepared in accordance with the laws of a non-Swiss jurisdiction (a foreign prospectus);
  • previously approved by a non-Swiss authority that is recognised for such purposes under the FinSA (a recognised foreign authority);
  • filed with a review body for automatic acceptance in accordance with article 54(2) of the FinSA; and
  • published in accordance with the rules of the FinSA prior to commencement of such offering or admission to trading.
• the securities being offered or admitted to trading are bonds or structured products that meet certain requirements, and a Swiss bank or a Swiss securities house has confirmed before the commencement of the public offering or application for admission to trading that all ‘relevant information’ is available in relation to the issuer (and, if applicable, the guarantor) and the securities. In such cases, the final prospectus must be prepared and filed with a review body for approval during the two-month period after the commencement of the public offering or application for admission to trading (with shorter periods applying to securities with a term of 180 days or less);² or
• there is an available exemption from the requirement to prepare a prospectus and have it approved.

In addition, in the case of offerings of securities that constitute debt instruments with a ‘derivative character’ (as understood under the FinSA and the FinSO³) that will be made to private clients in Switzerland, a so-called key information document (a Swiss KID) must be prepared by the manufacturer (usually the issuer) of the security. For any such debt instruments that do not constitute structured products, compliance with this requirement is subject to a grace period that will expire on 31 December 2021. If a Swiss KID is required, a key information document (KID) that has been prepared in accordance with Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) may be used instead.

As described in more detail under the checklists below, three basic questions should be answered by non-Swiss issuers and their advisers if they plan to extend an offering of securities cross-border into Switzerland, in order to determine what, if any, Swiss legends and selling restrictions must or should be included in the offering documents. This paper discusses only the circumstances under which Swiss legends and selling restrictions must or should be included in offering documents but does not describe the new prospectus regime itself in further detail. In addition, this paper does not address the requirements in relation to the cross-border offering of financial instruments that qualify as collective investment schemes or structured products, each as defined under Swiss law, and references below to securities and debt instruments should be construed accordingly.

II. Checklists for determining prospectus requirements under the FinSA and applicable legends and selling restrictions

The following checklists and legends assume a cross-border offering into Switzerland whereby the offered securities will not be admitted to trading on any trading venue (exchange or multilateral trading facility) in Switzerland. Any application for such an admission to trading would in and of itself trigger prospectus requirements under the FinSA, and the exemptions from such requirements are not identical to those that are available for public offerings in Switzerland.

Checklist 1: Is a prospectus required under the FinSA for the particular offering?

1. is the offering addressed to the public in Switzerland?
   1. a) If no: the offering qualifies as a private placement in Switzerland and no prospectus is required to be prepared under the FinSA.
   2. b) If yes: do any of the specific exemptions mentioned in articles 36 and 37 of the FinSA (herein referred to as per se exemptions⁴) apply? We expect the following per se exemptions to be particularly relevant: (x) the securities being offered have a minimum denomination of CHF 100,000 (or its equivalent in another currency) or higher, or (y) the offering in Switzerland is limited to professional clients (as defined in the FinSA) only.
      i. If no: a prospectus is required to be prepared and approved by a Review Body under the FinSA.
      ii. If yes: no prospectus is required to be prepared under the FinSA.

Under the new prospectus regime, the following questions need to be answered in order to determine whether a cross-border offering into Switzerland is considered public and, consequently, whether a prospectus must be prepared, approved by a review body, and published in accordance with the requirements of the FinSA (subject to the questions under Checklist 2 below):

Checklist 2: What kind of prospectus may be used under the FinSA?

If a prospectus is required under the FinSA for the particular offering, then the following questions should be answered to determine what kind of prospectus must (or may) be used for purposes of satisfying such requirements.

1. Does the issuer have a foreign prospectus that either (x) can be filed with a review body for approval because it meets IOSCO standards and contains information equivalent to the information required under the FinSA, or (y) has been approved by a recognised foreign authority and can be filed with a review body for automatic acceptance in accordance with article 54(2) of the FinSA?
   1. a) If no: a FinSA-compliant prospectus must be prepared and approved by a Review Body prior to commencement of the public offering into Switzerland (subject to reliance on the exemption described in sub-clause b).
   2. b) If yes (and, in the case of sub-clause (x) of this question 1, assuming approval by a review body): such foreign prospectus may be used in place of a FinSA-compliant prospectus for purposes of the public offering into Switzerland.
2. In the case of debt instruments: if no prospectus of the type described in question 1 above is available, can the issuer rely (and does the issuer want to rely) on the exemption from the ex ante prospectus approval requirement under article 51(2) of the FinSA?
   1. a) If no: a FinSA-compliant prospectus must be prepared and approved by a review body prior to commencement of the public offering into Switzerland.
   2. b) If yes: see bullet point on bonds and structured products in Section I.

Checklist 3: Is a Swiss key information document required?

As previously noted, a Swiss KID must be prepared in certain circumstances and made available to retail investors (which are referred to under the FinSA as ‘private clients’). The applicability of such requirement must be assessed independently of whether there is a duty to prepare and publish a prospectus in accordance with the FinSA (see Checklist 1).

In order to determine whether or not this requirement applies to a particular cross-border offering of securities into Switzerland, the following questions should be answered.

1. Do the securities being offered constitute debt instruments with a ‘derivative character’?
   1. a) If no: no Swiss KID is required under the FinSA.
   2. b) If yes: go to next question.
2. Is the offering in Switzerland being extended to private clients as defined under the FinSA?
   1. a) If no: no Swiss KID is required under the FinSA.
   2. b) If yes: a Swiss KID is required to be prepared by the manufacturer under the FinSA.

III. Selling restrictions

Depending on the answers to the questions set out in Section II above, the following legends and selling restrictions may be considered for inclusion in offering documents.

Regarding prospectus requirements under the FinSA

OPTION 1: NO PUBLIC OFFERING INTO SWITZERLAND

If no per se exemption from the obligation to publish an approved prospectus under the FinSA applies (see Checklist 1), then the issuer has the option to structure the offering as a private placement (an offering that is not directed to the public – see Checklist 1) in Switzerland. In such case, the following legend should be included in the offering materials:

‘[This [document] is not intended to constitute an offer or solicitation to purchase or invest in the [securities].]⁵ The [securities] may not be publicly offered, directly or indirectly, in Switzerland within the meaning of the Swiss Financial Services Act (FinSA) and no application has or will be made to admit the [securities] to trading on any trading venue (exchange or multilateral trading facility) in Switzerland. Neither this [document] nor any other offering or marketing material relating to the [securities] constitutes a prospectus pursuant to the FinSA, and neither this [document] nor any other offering or marketing material relating to the [securities] may be publicly distributed or otherwise made publicly available in Switzerland.’

OPTION 2: PER SE EXEMPTION FROM SWISS PROSPECTUS REQUIREMENT

If there is a public offering into Switzerland, but a per se exemption from the obligation to prepare a prospectus under FinSA applies (see Checklist 1), then the following legend should be included in the offering materials:

‘The offering of the [securities] in Switzerland is exempt from the requirement to prepare and publish a prospectus under the Swiss Financial Services Act (FinSA) [because such offering is made to professional clients within the meaning of the FinSA only] [because the [securities] have a minimum denomination of CHF 100,000 (or equivalent in another currency) or more] [because (add description of other exemption pursuant to articles 36 and 37 FinSA)][and the [securities] will not be admitted to trading on any trading venue (exchange or multilateral trading facility) in Switzerland].⁶ This [document] does not constitute a prospectus pursuant to the FinSA, and no such prospectus has been or will be prepared for or in connection with the offering of the [securities].’

OPTION 3: PROSPECTUS FILED WITH REVIEW BODY FOR AUTOMATIC APPROVAL

If the cross-border offering into Switzerland will be public, but the issuer has a foreign prospectus available that was approved by a recognised foreign authority and can be (and has been) filed with a review body for automatic acceptance in accordance with article 54(2) of the FinSA, then it is recommended that the following legend be included in either the prospectus itself, a wrapper or cover page, or e-disclaimer thereto (or such other document that will accompany the prospectus for purposes of distribution in Switzerland):

‘[This][The attached] prospectus has been filed as of [date] with [review body] pursuant to article 54(2) of the Swiss Financial Services Act, and may be obtained in electronic or printed form, free of charge, upon request from [address, phone, fax, e-mail, website].’

OPTION 4: PUBLIC OFFERING OF DEBT INSTRUMENTS IN SWITZERLAND IN RELIANCE ON ARTICLE 51(2) OF THE FINSA

In the case of certain types of debt instruments, if the issuer has no foreign prospectus available that was approved by a recognised foreign authority and can be (and has been) filed with a review body for automatic acceptance prior to the public offering, the issuer and lead manager(s) could agree to rely on article 51(2) of the FinSA. In this case, the prospectus is only required to be approved by a review body subsequent to the commencement of the public offer in Switzerland. The following legends must be included in the preliminary prospectus or other offering document that forms the basis of the public offer in Switzerland:

The offering document used for the launch must contain ‘red herring’ language on the cover page as follows:

‘SUBJECT TO COMPLETION AND AMENDMENT | [Preliminary Prospectus][¦] dated [¦]
The information contained in this [document | Preliminary Prospectus] is not complete and is subject to completion and amendment. This [document | Preliminary Prospectus] has not been reviewed or approved by a Swiss review body pursuant to article 52 of the Swiss Financial Services Act. This [document | Preliminary Prospectus] does not, and is not intended to, constitute or contain an offer or invitation to sell, and it is not soliciting offers to buy, [Bonds | Notes] in any jurisdiction where such offer or sale is not permitted.’

The offering document used for the launch must also contain an additional legend as follows:

‘The [Issuer | offeror] is relying on an exemption pursuant to article 51(2) of the Swiss Financial Services Act (FinSA). Accordingly, in accordance with article 40(5) of the FinSA, potential investors in the [Bonds | Notes] are hereby notified that this [document | Preliminary Prospectus] has not yet been reviewed or approved by a Swiss review body pursuant to article 52 of the FinSA. The [Bonds | Notes], if issued, will be issued on the basis of [the final prospectus relating to the [Bonds | Notes] (the "Final Prospectus")][this [document | Preliminary Prospectus], together with the [pricing supplement] (together, the "Final Prospectus")], which will only be submitted to a Swiss review body pursuant to article 52 of the FinSA for review after completion of the offering of the [Bonds | Notes]. Potential investors should be aware that the [Terms of the Bonds | Terms and Conditions of the Notes] set out in this [document | Preliminary Prospectus] are incomplete and subject to amendment and completion in the Final Prospectus. Accordingly, the rights of [Holders] under the [Bonds | Notes] will be determined exclusively by the [Terms of the Bonds | Terms and Conditions of the Notes] set out in the Final Prospectus.

This [document | Preliminary Prospectus] will not be updated for any developments that occur after its date. In particular, this [document | Preliminary Prospectus] is not required to be updated as per the date of any approval by any Swiss review body pursuant to article 52 of the FinSA. Consequently, neither the delivery of this [document | Preliminary Prospectus] nor the offering, sale or delivery of any [Bonds | Notes] shall in any circumstances imply that the information contained herein concerning the Issuer is correct at any time subsequent to the date hereof or that any other information supplied in connection with the issue of the [Bonds | Notes] is correct as of any time subsequent the date indicated in the document containing the same.’

For the avoidance of doubt, in addition to the legends set out above, any such offering document that forms the basis of the public offer in Switzerland must comply with other requirements as to form and substance as set out in the FinSA and the FinSO.

OPTION 5: PUBLIC OFFERING IN SWITZERLAND DURING THE GRACE PERIOD WITH A CODE OF OBLIGATIONS-COMPLIANT PROSPECTUS

In the case of a public offering in Switzerland during the transition period applicable to compliance with the new prospectus regime under the FinSA, an issuer may elect to (or, if no review body has yet been licensed, will be required to) comply with the prospectus disclosure requirements set out under article 652a and, if applicable, article 1156 of the Swiss Code of Obligations (which articles have been repealed and replaced by the FinSA), instead of the prospectus disclosure and review body approval requirements under the FinSA. Although no legend is required in this regard, we recommend that the following legend be included in the prospectus:

‘In accordance with article 109 of the Swiss Financial Services Ordinance, this [document | Prospectus] has been prepared in compliance with article[s] 652a [and 1156] of the Swiss Code of Obligations, as such [article was | articles were] in effect immediately prior to the entry into effect of the Swiss Financial Services Act (FinSA)[, and the Listing Rules of the SIX Swiss Exchange in their version in force as of January 1, 2020]⁷. Consequently, this [document | Prospectus] has not been and will not be reviewed or approved by a Swiss review body pursuant to article 51 of the FinSA, and does not comply with the disclosure requirements applicable to a prospectus approved by such a review body under the FinSA.’

Swiss key information documents

Irrespective of whether a Swiss KID (or equivalent document such as a PRIIPs KID) must be prepared by the manufacturer and made available to investors (see Checklist 3), an additional legend relating to Swiss KIDs must be included in the offering documentation if the securities being offered constitute debt instruments with a ‘derivative character’. We suggest including such legend in the section of the offering document that contains the legends on US securities laws, MiFID II, the PRIIPs Regulation, etc., or, if there is no such section, immediately following the applicable Swiss selling restriction that has been included in the offering document as set out above.

Add the following legend in the case of an offering of securities that constitute debt instruments with a ‘derivative character’ if the securities may be offered to private clients as defined under the FinSA (which means that a Swiss KID (or equivalent) must be prepared):

‘A [Swiss key information document | PRIIPs KID] has been prepared in relation to the [securities] and may be obtained, free of charge, upon request from [address, phone, fax, e-mail, website].’

Add the following legend in the case of an offering of securities that constitute debt instruments with a ‘derivative character’ if no Swiss KID (or equivalent document under the FinSA) has been or will be prepared, with the effect that the securities may not be

• offered to private clients in Switzerland; or
• recommended at the point-of-sale to private clients in Switzerland:

‘No key information document according to the Swiss Financial Services Act (the FinSA) or any equivalent document under the FinSA has been prepared in relation to the [securities], and, therefore, the [securities] may not be offered or recommended to private clients within the meaning of the FinSA in Switzerland.’

End notes