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In review: capital markets law in Switzerland – Lexology

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Introduction
For a better understanding of the Swiss capital market, it is worth highlighting that Switzerland is neither a member of the European Union (EU) nor the European Economic Area (EEA). Consequently, the EU Prospectus Regulation and other EU or EEA regulations relating to capital market offerings are not applicable in Switzerland. However, the Swiss financial market regulatory framework has undergone fundamental and comprehensive reforms over the past few years. The main purpose of these reforms was to harmonise Swiss regulations with existing and new EU regulations and to guarantee Swiss capital market participants free and unrestricted access to the European (capital) markets. The most important elements of the reform package in terms of Swiss capital markets are set out in the new Swiss Financial Services Act (FinSA) and its implementing ordinance, the Swiss Financial Services Ordinance (FinSO), which entered into effect on 1 January 2020, subject to a phase-in (which has predominantly been completed by now). The FinSA and FinSO, which are to a large extent modelled after the EU prospectus regime, govern the prerequisites for providing financial services and offering financial instruments in Switzerland. As part of this new legal framework, the FinSA and the FinSO have introduced for the first time in Switzerland a modern, comprehensive and harmonised prospectus regime for the Swiss (primary and secondary) capital markets applicable to all financial instruments, with certain adaptations for debt and equity instruments, as well as structured products, collective investment schemes and derivatives.
While the Swiss equity capital market activity was not strong in 2020, with the Swiss IPO market being essentially on hold due to the outbreak of the covid-19 pandemic and the related volatility in the capital markets, the Swiss IPO market is recovering quickly. As of the end of July 2022, eight IPOs (out of which four were global depository receipts issuances and listings) have already been launched on SIX Swiss Exchange Ltd, with an aggregate issue volume of approximately 1.75 billion Swiss francs and a total market capitalisation of approximately 1.6 billion Swiss francs. While the majority of the issuers are Swiss companies, there were also several foreign companies applying for a listing on the SIX Swiss Exchange Ltd in recent years, whereby some foreign issuers (such as PolyPeptide Group AG) have incorporated a new Swiss holding company to be listed on SIX Swiss Exchange Ltd. Furthermore, the Swiss domestic debt capital market was very active during the covid-19 pandemic, with both the public sector and (excluding the financial sector) the private sector having increased bond issue volumes significantly. In 2021, the volume of bond listings has further surpassed the volume in 2020 and of previous years.
The main legal sources in connection with (equity and debt) offerings in Switzerland are statutory Swiss law and the rules of the relevant Swiss stock exchange. The relevant Swiss capital market legislation governing the primary and secondary securities markets includes:
The principal stock exchange for the listing and trading of equity and debt securities, structured products, derivatives and other securities in Switzerland is SIX Swiss Exchange Ltd in Zurich. The second (regional) Swiss stock exchange is BX Swiss Ltd, in Berne, which is comparatively small and mainly focuses on domestic issuers. Each of SIX Swiss Exchange Ltd and BX Swiss Ltd have adopted – based on the principle of self-regulation – a comprehensive set of its own regulations, directives and notices governing, inter alia, certain requirements for admission to trading and listing and disclosure requirements. These rules must be approved by FINMA as supervising body. Given the rather limited importance of BX Swiss Ltd, this overview will focus on SIX Swiss Exchange Ltd.
In principle, the Swiss court system is based on a three-tier hierarchy: the first-instance cantonal courts (which apply both cantonal and federal law), the second-instance cantonal appellate courts and the Federal Supreme Court (the highest judicial authority in Switzerland). As an exception to the principle of double instance at cantonal level, there are certain specific matters that are brought directly before an inferior federal court (e.g., the Federal Administrative Court or the Federal Criminal Court) and other matters that can be directly decided by the exclusive first cantonal instance. Some cantons have established a commercial court as a sole cantonal instance competent for certain disputes relating to commercial matters. Judgments of the first-instance cantonal courts are generally subject to appeal to the second-instance cantonal appellate courts, and judgments of an inferior federal court, the second-instance cantonal courts or the sole cantonal instance courts are subject to appeal to the Federal Supreme Court, if certain conditions are met. No special courts with jurisdiction over securities-related actions exist in Switzerland.
The Swiss Financial Market Supervisory Authority (FINMA) being the principal financial regulator in Switzerland is an independent regulatory body responsible for the overall supervision of the securities exchanges and the financial market in Switzerland as a whole. FINMA has statutory authority to supervise securities exchanges, licensed banks, insurance companies, securities dealers and collective investment schemes. It authorises their operations to engage in financial market activity and ensures that the supervised institutions comply with the requisite laws, regulations and ordinances and maintain their licensing requirements. FINMA has certain limited powers to enforce the provisions of the FinMIA and to proceed with and take administrative measures against any failure to disclose shareholdings, insider trading and market manipulation. As a general rule, decisions of FINMA may be challenged at the Federal Administrative Court, the decisions of which may be appealed at the Federal Supreme Court. The prosecution of insider trading and market manipulation is the responsibility of Switzerland’s attorney general.
SIX Swiss Exchange Ltd, a self-regulated organisation, has established the following regulatory bodies within its organisation: (1) SIX Exchange Regulation Ltd monitoring and enforcing compliance with the rules, regulations and directives of SIX Swiss Exchange Ltd; (2) regulatory board of SIX Swiss Exchange Ltd as rule-making body; (3) three judicial bodies (the Sanctions Commission, the Independent Appeals Board and the Board of Arbitration) dealing with any appeals against a (sanction) decision made by SIX Exchange Regulation or disputes between SIX Exchange Regulation and any listed company concerning the listing, delisting or trading of securities on SIX Swiss Exchange Ltd; and (4) the disclosure office supervising and overseeing compliance primarily with the disclosure requirements of significant shareholdings.
SIX Exchange Regulation Ltd and BX Swiss AG are reviewing bodies licensed and supervised by FINMA that are required to review and approve the relevant prospectuses prior to a public offering of securities in Switzerland or the admission of securities to trading on a trading venue in Switzerland.
The Swiss Takeover Board is a federal commission that enacts rules on public takeover offers and public share buybacks and supervises compliance with those rules. Decisions of the Swiss Takeover Board may be challenged before FINMA and, finally, the Federal Administrative Court.
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Joseph Muongi

Financial.co.ke was founded by Mr. Joseph Muongi Kamau. He holds a Master of Science in Finance, Bachelors of Science in Actuarial Science and a Certificate of proficiencty in insurance. He's also the lead financial consultant.