Category Archives: Securities

Insider Trading and Market Manipulation in Tokens

Trading in tokens is currently in the spotlight of the public’s and the regulator’s attention. Based on distributed ledgers-technology, blockchain technology is used to issue tokens as tradable digital units and to record ownership and transactions of the issued tokens. At present, there are no specific laws and little regulation applying to trading in tokens in Switzerland. With a view to improve market confidence as well as to ensure proper functioning and transparency of token trading, a variety of legal issues have yet to be resolved. In particular, the question of insider trading and market manipulation needs to be clarified.

By Thomas U. Reutter / Daniel Raun (Reference: CapLaw-2018-43)

New Reporting Obligations for Securities Dealers and Participants of Swiss Trading Venues

On 1 January 2018, FINMA’s new circular 2018/2 on the reporting of securities transactions (“FINMA Circular 18/2”) entered into effect. The purpose of FINMA Circular 18/2 is to implement the reporting obligations set out in the Swiss Financial Market Infrastructure Act (“FMIA”) and to further regulate technical aspects of the reporting obligations. Compared to the previously existing reporting obligations, the FMIA and FINMA Circular 18/2 will bring about a number of significant changes, including the reporting of certain derivatives transactions and reporting of beneficial owners.

By Patrick Schleiffer / Patrick Schärli (Reference: CapLaw-2018-14)

First experiences with the New Disclosure Law

On 1 March 2017, a partial revision of the Ordinance of the Swiss Financial Market Supervisory Authority on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading (FINMA Financial Market Infrastructure Ordinance, FMIO-FINMA) regarding disclosure of significant shareholdings entered into force. On 3 October 2017, the Disclosure Office of SIX Swiss Exchange (“DO”) published its annual report for 2016 (“DO Annual Report 2016”) which dealt with many of the questions that lead to the partial revision of the FMIO-FINMA.

This article provides an overview of the first experiences with the new disclosure law, in particular in relation to the reporting requirement for parties with the power to freely exercise voting rights and the reasoning that resulted in the partial revision together with some critical thoughts in this context (Section 1). This article also summarizes the practice of the DO regarding the scope of the term “beneficial owner” (Section 3). Furthermore, FINMA recently made some clarifying comments on the reporting system for collective investment schemes in art. 18 FMIO-FINMA, which will be taken up in Section 2.

By Andrea Rüttimann (Reference: CapLaw-2018-15)

Swiss Capital Markets: New Rules regarding Swiss Withholding Tax

A bond issued by a foreign resident issuer but guaranteed by its Swiss resident parent company is reclassified as a domestic issuance and subject to 35 percent withholding tax if the proceeds raised under such bond are used in Switzerland. According to new rules which entered into force on 1 April 2017, it is possible to use the proceeds in Switzerland up to an amount equal to the equity of the foreign issuer and to still avoid a reclassification.

By Stefan Oesterhelt (Reference: CapLaw-2018-01)

Cross-Border Transactions in Intermediated Securities: Switzerland Maintains its Lead (Part 2/2)

“The transnational nature of collateral goes beyond the mere (but important) fact that the parties to a swap are often incorporated in different jurisdictions. Collateral may be posted in different currencies, or in the form of government bonds issued by different governments. The collateral is held with intermediaries often incorporated in yet other jurisdictions, with places of business in still other locales. These intermediaries book the collateral in computerized ledgers maintained on servers that may be located elsewhere in the world. And if, as is permitted under the law of some countries, the pledgee (the party that receives the collateral) “repledges” the collateral to yet another party to satisfy its own obligations, which then repledges it again, then lawyers are left to make sense of a constant global movement of collateral in and out of accounts in many jurisdictions in terms of legal rules created to address a far more stationary and localized conception of property and contract rights.”

Annelise Riles, Collateral Knowledge: Legal Reasoning in the Global Financial Markets, p. 43 (University of Chicago Press, 2011)

By Thomas Werlen / Matthias Wühler / Jonas Hertner (Reference: CapLaw-2018-02)

Cross-Border Transactions in Intermediated Securities: Switzerland Maintains its Lead (Part 1/2)

On 1 April 2017, the Hague Convention on the Law Applicable to Certain Rights in Respect of Securities held with an Intermediary entered into force. The entry into force of the Convention coincides with renewed efforts by the European Commission at modernising the conflicts rules for the third-party effects of transactions in book-entry securities and financial claims in the overall context of the Capital Markets Union action plan.

By Thomas Werlen / Matthias Wühler (Reference: CapLaw-2017-43)

The Extraterritorial Reach of the New EU Share Trading Obligation

The new Market in Financial Instruments Regulation (MiFIR) will introduce a share trading obligation which requires EU investment firms to trade shares on an EU trading venue, an EU systemic internaliser or on an equivalent third country exchange only. Should the Swiss legal framework not be considered equivalent to the EU regulation as of the date of the launch of MiFID II/MiFIR (3 January 2018), EU investment firms would be required to trade dual-listed shares outside of Switzerland, even if the deepest pool of liquidity is in Switzerland. This article briefly describes the EU equivalence regimes in general, the requirements and effects of the relevant equivalence provision with regard to the share trading obligation, as well as its effects on Swiss trading venues.

By Marco Toni / Lea Hungerbühler (Reference: CapLaw-2017-15)

Current market practice of subsequent prospectus review for bonds and derivatives can be maintained under article 53 FinSA

Article 53(1) FinSA introduces a pre-review of prospectuses by a reviewing body, while article 53(2) FinSA allows the Federal Council to provide for exemptions. The Federal Council should continue to allow subsequent reviews substantially in the same way as the regulatory board allows provisional trading. The confirmation pursuant to article 53(2) FinSA is addressed to the reviewing body and confirms formal completeness against the prospectus content lists. Only administrative consequences imposed by FINMA are attached to an incorrect confirmation.

By Matthias Courvoisier (Reference: CapLaw-2017-16)

EU Shareholder Rights Directive: Action required for Switzerland?

Efforts to amend the EU Shareholder Rights Directive have lost momentum. The most recent resolution of an EU institution has been passed more than a year ago by the EU parliament. The Brexit vote in the United Kingdom has cast further doubt on the directive’s future design. Nevertheless, efforts to improve the governance of European companies and to strengthen the rights of shareholders will continue and the most recent proposal to amend the directive is likely still indicative of the future form and shape of corporate governance in the EU. Third countries like Switzerland should closely monitor the EU’s next steps on the directive, analyze any gaps and decide whether such gaps should be closed.

By Thomas U. Reutter (Reference: CapLaw-2016-43)

Capital “On Demand”: Equity Lines / Share Subscription Facilities for Swiss Listed Companies

Many listed companies are seeking “on-demand” capital solutions that are tailor made to their specific needs. These companies often enter into arrangements with an institutional investor, whereby the company has the right to call specified amounts of cash from the investor against issuance or delivery of a certain amount of shares in return. Such arrangements are often referred to as “equity lines”, “equity distribution agreements” or “share subscription facilities”. This article explores how such agreements are best structured for Swiss listed and incorporated issuers from both a corporate and a capital markets perspective.

By Thomas Reutter / Annette Weber (Reference: CapLaw-2016-18)