The prospectus obligation under the Financial Services Act (FinSA)
The upcoming Financial Service Act brings substantial changes regarding the prospectus obligation for the issuers of securities.
Generally, any person in Switzerland who makes a public offer for the acquisition of securities or any person who seeks the admission of securities to trading on a trading venue must first publish a prospectus. As a novelty, the prospectus and approval requirement will apply for both primary and secondary offerings and to all securities that shall be admitted on a trading platform in Switzerland. To avoid conflict with the existing law, a transitional period shall apply for already publicly offered securities or those being subject to a prior request for admission to trading.
New ex ante approval requirement
According to current Swiss law, generally, the offering prospectus needs not to be filed with or approved by any governmental authority. In contrast, with certain exemptions (e.g. prospectuses for non-foreign collective investment schemes do not have to be reviewed), the FinSA stipulates the necessity of a prior approval for offering prospectuses. Such approval shall be given by a new regulatory reviewing body blessed with considerable administrative powers. Accordingly, it needs to be licensed by FINMA. If justified, FINMA may grant such licence to several reviewing bodies. The reviewing body shall determine whether the prospectus is complete, coherent and understandable.
New issuers must ask for approval 20 days prior to the commencement of the offering or admission to trading; all others at least ten days in advance. The reviewing body shall decide on approval within ten days of receipt of the possibly rectified prospectus, but failure to do so shall not constitute its approval. In case the prospectus does not meet the statutory requirements, the reviewing body shall notify the person who submitted the prospectus within ten calendar days from the time of receipt, stating the reasons for the insufficiency and asking the person to make the necessary improvements.
Approval of foreign prospectus
The reviewing body may approve a prospectus produced under a foreign legislation, if it was prepared according to international standards established by international organisations of securities regulators, and if the duty to inform, including financial information, is equivalent to the requirements set forth in the FinSA. It is expected that at least the EU and US provide sufficient disclosure standards. Moreover, the reviewing body can provide that prospectuses approved in certain jurisdictions (yet to be listed) are automatically considered approved in Switzerland, too. Nevertheless, such prospectus still must be published and deposited with the reviewing body.
Depending on the type of offer or security, a prospectus does not need to be published. For example, the list of exempted transactions includes public offerings addressed solely at investors classified as professional clients or public offerings with a minimum denomination per unit of CHF 100,000. More exemptions apply.
Content of prospectus
According to FinSA, the prospectus must contain certain essential information with respect to the issuer, guarantor, security provider, the securities and the offer. It has to be publish either in one of the official Swiss languages or in English, enabling the investor to make an informed investment decision. Further content requirements shall be determined in the respective ordinance.
Basic information document
If financial instruments are offered to retail clients, a so called key information document must be produced, providing all relevant information in a readily understandable way. In contrast, if securities are offered in the form of shares, including share-like securities allowing for participation rights, there is no such obligation.
Generally, if the provided information in the prospectus or in the key information document or similar communications is inaccurate, misleading or violating statutory requirements, the person responsible is liable to the acquirer of the financial instrument for the resultant losses, unless they can prove that they acted with due diligence and, thus, are not at fault.
To be prepared for the above mentioned regulatory changes, a timely review of the documentation of securities issued or traded in Switzerland is highly recommended. Even though the proposed Swiss regulation is rather lenient compared to its pendant in the EU, compliance with the relevant provisions is crucial to prevent any legal risks.
Sandro Germann is an associate (not admitted to the bar) in our Zurich office. He focusses on corporate and commercial law, banking and finance matters and M&A transactions.T: +41 434 34 67 3 E: email@example.com