Private placingsSpecific regulation
Are there specific rules for the private placing of securities? What procedures must be implemented to effect a valid private placing?
Swiss law does not provide for specific rules governing the private offering of equity or debt securities. As a general rule, the private placement of securities in Switzerland does not require a prospectus. A placement is deemed to be private if it is not made to the public (ie, if it is addressed to a limited circle of offerees). While no clear limitation on the permitted number of potential investors to whom securities can be offered by way of a private placement exists under Swiss law, the more conservative view in Switzerland is that an offering directed at or made to 20 or fewer potential investors (irrespective of their sophistication or wealth) qualifies as a private offering under Swiss law. For the purposes of determining the number of potential investors, the number of persons approached is relevant and not the number of persons who eventually purchase the relevant securities. This rule, which is or was used in other areas of Swiss financial legislation, may be viewed as a safe harbour rule. However, in light of the amended EU Prospectus Directive (although not applicable in Switzerland), pursuant to which an offering addressed to fewer than 150 persons per member state does not trigger an obligation to prepare a prospectus, the above-mentioned 20 offeree rule has been criticised as being too stringent. It is at the same time not disputed that the legal concept of a ‘limited circle of offerees’ has not only a quantitative, but also a qualitative aspect. Arguing that the focus should not primarily be on the number of offerees approached but on the manner in which potential investors are being approached, an offering to more than 20 potential investors should be permissible (without triggering an obligation to prepare a prospectus), provided that: the prospective investors are hand-picked and are being approached on an individual basis (eg, through personal letters or ‘by invitation only’ presentations); and the offering is directed at or made to a predefined circle of potential investors that share common qualifying criteria that distinguish them from the public at large.
However, this latter approach is still untested, and an offering of equity or debt securities directed at or made to more than 20 potential investors may not, in the present state of law and practice, be considered to be a safe harbour.
Privately placed debt securities issued by a non-Swiss issuer with the participation of Swiss banks or securities dealers are subject to the guidelines of the Swiss Bankers’ Association on notes of foreign borrowers. If the issue of the debt securities is governed by Swiss law, and the securities are denominated in Swiss francs with denominations of 10,000 Swiss francs or more, then the relevant Swiss lead manager is required, pursuant to the guidelines, to prepare a prospectus that complies with the disclosure requirements set forth in the guidelines.
No prior approval of FINMA is required for the offering of shares or interests in a non-Swiss collective investment scheme in or from Switzerland if such offering is directed at and made exclusively to ‘qualified investors’ (as defined in CISA and its implementing ordinance and guidelines). However, under CISA such offering may trigger regulatory requirements such as the appointment of a Swiss representative and a Swiss paying agent.
The concept of ‘qualified investors’ encompasses, inter alia:
- financial intermediaries that are subject to a prudential supervision (ie, banks, securities dealers, fund management companies, asset managers of collective investment schemes and central banks);
- supervised insurance companies;
- pension funds with professional treasury management;
- corporate investors with professional treasury management;
- high-net-worth individuals (ie, individuals that are holding, directly or indirectly, a minimum net wealth of 5 million Swiss francs in financial assets or holding a minimum net wealth of 500,000 Swiss francs and having sufficient technical knowledge), provided such individuals or, in the case a private investment structure has been set up for one or more high-net-worth individuals, the person responsible for managing the investment structure, have expressly requested, on a written basis, (‘opt-in’) to be considered as ‘qualified investors’;
- investors having entered into a written discretionary asset management agreement, provided that they do not exercise their right to ‘opt out’ of the ‘qualified investors’ status and the written discretionary asset management agreement is entered into with a regulated financial intermediary or with an independent asset manager that is subject to anti-money laundering supervision, rules of conduct meeting certain minimum requirements, and the relevant management agreement complies with the directives of a recognised professional organisation (eg, Swiss Bankers’ Association guidelines); and
- independent asset managers (if the relevant independent asset manager meets the requirements of the CISA and undertakes in writing to exclusively use the fund-related information for clients who are themselves ‘qualified investors’).
In contrast, an offering of non-Swiss collective investment schemes that is exclusively directed at, or made to, financial intermediaries that are subject to a prudential supervision (ie, banks, securities dealers, fund management companies, asset managers of collective investment schemes, insurance companies and central banks) or to investors having entered into a written discretionary asset management agreement is not considered a ‘distribution’ within the meaning of CISA and therefore is not subject to any regulatory requirements whatsoever.
Further, the distribution of structured products in or from Switzerland limited to qualified investors as defined in CISA is not subject to regulatory requirements under CISA; in particular, no simplified prospectus will need to be prepared in connection with such offering.Investor information
What information must be made available to potential investors in connection with a private placing of securities?
Except for specific information and prospectus requirements applicable to privately placed debt securities governed by Swiss law and issued with the participation of Swiss banks or securities dealers pursuant to the guidelines of the Swiss Bankers’ Association on notes of foreign borrowers (see question 7), no specific information is required to be made available to potential investors.
Non-Swiss collective investment schemes to be distributed to qualified investors in Switzerland must use fund documentation mentioning the Swiss representative, the Swiss paying agent, the place of jurisdiction and the place where the relevant fund documents are available free of charge. In addition, and in order to comply with the Swiss Funds & Asset Management Association’s (SFAMA) guidelines on the distribution of collective investment schemes (the Distribution Guidelines) and the SFAMA guidelines on duties regarding the charging and use of fees and costs (the Transparency Guidelines), certain information on fees and costs as well as on retrocessions and rebates must be disclosed in the relevant fund documentation.
Notwithstanding the above, information submitted to potential investors must be accurate and may not be misleading. If false or misleading statements are made in connection with a private placement, the issuer or the persons involved in preparing the relevant offering documents and the offering may become liable (see question 19).Transfer of placed securities
Do restrictions apply to the transferability of securities acquired in a private placing? And are any mechanisms used to enhance the liquidity of securities sold in a private placing?
As explained more fully in question 7, any private offering of securities made with an aim to ultimately offer or distribute the relevant securities to the public is deemed to be a public offering. Otherwise, no restrictions apply to the transfer of securities acquired in private placements. In view of the foregoing, liquidity enhancing mechanisms are not commonly used techniques with respect to private placements in Switzerland.