When selling and publicly offering shares, bonds, security tokens, structured products, fund units, and other financial instruments in Switzerland, the prospectus obligation and prospectus liability under the Financial Services Act (FinSA/FIDLEG) must be taken into account from a legal perspective. The LEXR financial market experts guide you from the question of whether a prospectus is necessary at all to the preparation of a prospectus, a Key Information Document (KID/BIB), or a Private Placement Memorandum (PPM) to the approval of the prospectus with an official prospectus review office. Furthermore, through our experts in the Berlin office, we can also assist with distribution in the EU.
Anyone making a public offer to purchase securities in Switzerland must prepare a Prospectus and have it approved by a review office unless an exception applies (see next question).
The meaning of public offer is broad, but there are broad exceptions to the prospectus obligation. For example, according to Art. 36 FinSA, no prospectus has to be issued if one of the following criteria is met (these requirements are alternative, not cumulative):
‘Securities’ are, for example, shares and bonds, but also security tokens or other standardized capital market instruments that are available for mass trading. However, there are also various exempted types of securities, e.g., employee participation plans or short-term money market instruments.
A KID is a short document that informs investors about the most important key points of a financial instrument. According to Art. 58 FinSA, a KID is only required for the offer of financial instruments to private clients. Shares are explicitly excluded from the scope of application, i.e., a KID is not required for traditional financing rounds. Approval by a prospectus review office is not required.
A PPM is a comprehensive description of an investment opportunity in the context of a private placement of securities and financial instruments. The PPM is not regulated in Switzerland and is generally not a legal obligation but is often expected as a basis for an investment when selling to professional investors.
According to the FinSA, private liability applies to persons, such as founders or the board of directors, who provide incorrect, misleading information or information that does not comply with the legal requirements in the prospectus, the KID or similar documents. In addition, in case of intentional misrepresentation or non-disclosure of material facts, there may also be a penalty procedure. Even in the case of PPMs or other sales of securities outside the FinSA, investors may be able to claim damages in the event of a loss. Accordingly, it is important that a prospectus, a KID, a PPM, and similar documents are carefully drafted.
The process for prospectuses and Key Information Documents in the EU varies and depends on the member states in which the public offering is to take place. Under certain circumstances, a prospectus or a Key Information Document approved in one member state may also be deemed approved for use throughout the EU as well as in Switzerland (passporting).
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