SWITZERLAND: An Introduction to Capital Markets
Framework Conditions
Companies from across the globe and stemming from a wide range of industries which are looking to raise capital are continuously attracted by Switzerland’s economic conditions and the success of the Swiss capital markets. Switzerland boasts a legal and regulatory framework ensuring competitiveness as well as compliance with internationally recognised standards, while maintaining a “Swiss finish”, and further offers a healthy, long-established and yet dynamic financial ecosystem.
Issuers placing shares or fixed income instruments with investors are regularly supported by both Swiss and international investment banks. Their high placing power is one of the aspects making the Swiss capital market an attractive and effective choice for issuers. In fact, a significant number of transactions taking place in Switzerland are structured as 144A offerings targeted at qualified investors, which shows the Swiss capital markets’ ability to reach an international investor base. State-of-the-art financial market infrastructures further contribute to the Swiss market’s appeal – as do internationally renowned industry clusters, such as for pharmaceutical and biotech companies. An additional boost comes from Switzerland’s continuous leading ranking in the WIPO (World Intellectual Property Organization) Global Innovation Index for the last 14 years.
The Swiss regulatory environment is deservedly known for being stable and well developed, leaving market participants a certain degree of flexibility at the same time and contributing to attractive framework conditions for the capital market. This flexibility is partially due to Switzerland’s long tradition of self-regulation by the industry, which allows for a much faster legislative action and the adoption of tailored, practical rules.
Overview of the Financial Market Infrastructure
Two stock exchanges operate in Switzerland, SIX Swiss Exchange (part of the SIX Group) and BX Swiss. Both are stock exchanges within the meaning of the Financial Market Infrastructure Act of 19 June 2015 and licensed and supervised by the Swiss Financial Market Supervisory Authority FINMA.
On both exchanges, shares, bonds, exchange traded funds and structured products are listed and traded. BX Swiss is traditionally the listing venue favoured by smaller (typically Swiss) companies, whereas the issuers on Swiss Exchange also include multinational corporations. SIX Swiss Exchange accommodates for smaller companies which wish to tap into the capital markets for financing their activities with a dedicated listing segment tailored to their needs (so-called SPARKS segment). In addition to the more traditional trading segments, in late 2021, SIX Swiss Exchange created its listing standard for SPACs and in 2022 it introduced a listing standard for global depository receipts (GDRs), targeting mainly Chinese issuers. GDRs represent underlying shares which have been deposited with a depository bank and are tradable securities similar to American depositary receipts (ADRs).
The listing process and the listing requirements are subject to the exchanges’ self-regulatory powers. Prospectus requirements, however, are governed by the Federal Act on Financial Services (FinSA) of 15 June 2018 and are, to a great extent, aligned with those applicable in the EU. The same applies to the various exemptions from preparing a prospectus which are modelled to a large extent along the EU Prospectus Regulation. Prospectuses vetted and approved by the competent authority in an EU member state and a number of other jurisdictions are considered approved in Switzerland too, facilitating the extension of public offers initiated in different countries into Switzerland which might be particularly interesting to tap Swiss wealth management and institutional clients.
Spotlight on Selected Legal Reforms and Developments
A few legal reforms are worth mentioning, which may (directly or indirectly) impact the capital market and its players. While some of these new norms have already entered into force, some of them are still in the making and may still change or be further shaped/impacted by international developments.
Amendment to the FMIA Concerning the Consultation Procedure
After five years in force, the Federal Department of Finance was tasked to evaluate the Financial Market Infrastructure Act (FMIA) and propose amendments. The draft bill proposes several changes, of which some might have a major impact on companies listed on a Swiss stock exchange. In particular, the draft bill proposes to transfer the regimes on ad hoc publicity (ie, the obligation to disclose price-sensitive information) and disclosure of management transactions from the self-regulation of a stock exchange to governmental legislation. In addition, the new regime would provide for criminal liability for both intentional and negligent breaches resulting in a broadening of the penalisation of individuals. This shift of paradigm raises many questions as the current regime did not reveal any shortcomings in the past and is against the core principle of self-regulation of stock exchanges enshrined in the FMIA. The legislature’s argument that a transfer to governmental legislation would strengthen the market integrity seems to be founded on the believe of a “superiority” of governmental legislation over self-regulation without taking into consideration the matter that has to be regulated. Not very surprisingly, many market participants strongly pushed back on this proposed regulation in their responses to the consultation on the proposed amendments.
ESG Reporting Becomes Effective
The Swiss corporate law reform from 2023 addressed a wide array of matters focusing on the liberalisation of capital provisions, the strengthening of shareholder rights and new ESG disclosure duties (so-called non-financial reporting) and related obligations, whereas the latter can be considered as the most significant development. The new non-financial reporting duties require certain Swiss companies to report on non-financial matters for the first time in 2024 on the financial year 2023. Under the relevant provisions, the reporting obligations concern Swiss public companies (ie, companies subject to an ordinary audit) and financial institutions, which employed more than 500 FTE and had a balance sheet of more than CHF20 million or a turnover of more than CHF40 million (in each case calculated on a consolidated basis in two consecutive years).
Despite only being in force for slightly over one year, the Swiss legislature has already proposed an amendment to the non-financial reporting regime aiming to align the Swiss legislation with the requirements of the EU. Among others, the reporting threshold would be lowered and apply to all companies which cross two of the following thresholds for two consecutive years: balance sheet of more than CHF25 million; a turnover of CHF50 million; 250 FTE. Companies subject to the reporting obligation would also be required to publish their non-financial reports and make them accessible to the public. The draft bill faces a vocal criticism as the revised thresholds would capture many SME; hence, it remains to be seen if and to what extent it will be implemented and enter into force.
Foreign Investment Screening Act
Until recently, Switzerland’s legislation pertaining to foreign investments has been limited to very specific sectors – eg, the financial sector, residential real estate, aviation, telecommunications, etc. However, following an initiative of the Swiss parliament, a general foreign investment screening regime is now in the making with the goal to prevent takeovers that would endanger public order or security. After the receipt of a significant criticism in connection with a consultation process for the initial draft, the proposal published in December 2023 narrows the scope of application in principle to acquirers that are foreign state-controlled and which intend to invest into a Swiss company operating in a critical sector (eg, energy and water supply or suppliers in the defence industry). While it is still uncertain whether the draft bill will be enacted, the law, if enacted, would in our view only have a limited impact.
Limited Qualified Investor Fund (L-QIF)
The new L-QIF fund category came into force on 1 March 2024. Under the L-QIF fund regime, authorised fund management companies and managers of collective investment schemes may set up a fund for qualified investors without prior authorisation from FINMA. The L-QIF therefore requires neither direct authorisation nor supervision by FINMA. The competitive advantage of an L-QIF, also from an international perspective, is the very flexible possibility to invest in a variety of assets with very liberal investment restrictions. The regulatory aspects of the L-QIF include indirect supervision and a two-tiered audit. Indirect supervision of the L-QIF is carried out by the managing fund management company, which is authorised to delegate investment decisions to a manager of collective investments. The two-tiered audit consists of a financial audit and a supplementary audit. The supplementary audit covers compliance with requirements for L-QIFs.
Is the Swiss Capital Market Out of the Crisis?
Notwithstanding the challenges brought by the ongoing conflict between Russia and Ukraine, the energy crisis that ensued from it and the significant aggravation of the conflict between Israel and Palestine, capital market activity in Switzerland and the Swiss economy in general have fared relatively well in the past few years. However, like the global markets, Swiss markets are still confronted with great uncertainty.
These factors continue to affect the equity capital markets in Switzerland. In 2024, only two companies listed their shares on SIX Swiss Exchange with Galderma Group AG by way of an IPO and Sunrise Communications AG by way of a spin-off. In 2025, BioVersys AG, being the first Swiss biotech IPO in seven years, successfully completed its IPO in February, which hopefully paves the way for other IPO candidates.
The debt capital market issuances showed a strong momentum, with many issuers (Swiss and foreign) taking advantage of the favourable interest rate environment, tapping the market for Swiss and Euro bonds.