As there was no referendum against the new SEL it is to be expected that this new law will enter into force in the course of 1996. The SEL aims at creating the framework for guaranteeing the efficient functioning of the securities' market. As the wording of the Implementing Ordinance to be issued by the Federal Council, is not yet available, the following can only be a rough summary of some main issues.

The SEL limits itself to the regulation of the secondary markets (stock exchanges); issues are basically not regulated. The professional public offer of securities from issues is, however, restricted to banks and security dealers (except self-issuers of non-derivative securities).

Stock exchanges are now subject to authorisation and supervision by the Federal Banking Commission (FBC). According to the principle of self-regulation the organisation of the stock exchanges will be left to the individual stock exchange itself, which has also to issue rules concerning the admission of securities to trading; these rules and modifications thereof must, however, be submitted to the FBC for approval. Only security dealers are admitted to a stock exchange as market participants. The rules to be issued by the stock exchange regarding the admission, the duties and exclusion of security dealers must in particular respect the principle of equal treatment.

Persons wishing to operate as a security dealers require a licence from the FBC, whereby the Federal Council will lay down the minimum requirements for the granting of such licence. Existing security dealers must report to the Supervisory Authority within three months following the entering into force of this law, and shall satisfy the requirements of the law within two years of such date.

Security dealers in the sense of the SEL are natural persons or corporations within the meaning of the stock exchange law, who on a professional basis buy and sell securities for their own account for resale in the short-term or buy and sell for the account of third parties on the secondary market, who offer securities to the public on the primary market, or who create derivatives themselves and offer them to the public. Security dealers must have an adequate organisation, show the minimum required capital and sufficient equity. The security dealers, their responsible employees and their qualified shareholders must guarantee the orderly conduct of business operations. Similar to the banks, they are subject to supervision by the FBC.

With regard to companies domiciled in Switzerland, whose equity stock or part thereof is quoted on a stock exchange in Switzerland, the SEL lays down a notification obligation for participants in the capital market with regard to relevant stock exchange transactions, and an information obligation on the part of the company concerned. The SEL therefore goes beyond the revised provisions of company law (Art. 663c of the Swiss Code of Obligations). New is that whoever acquires or sells for his own account, either directly, indirectly or in agreement with third parties, shares of such a company, and thereby reaches, exceeds or falls below the threshold of 5, 10, 20, 33 1/3, 50 or 66 2/3 % of the voting rights (whether exercisable or not), must notify the company and the stock exchanges, on which the equity stock is quoted, of this fact. The conversion of participation certificates or profit-sharing certificates into shares, and the exercise of conversion or acquisition rights are treated in the same way as an acquisition. A group organised by way of a contract or in another way must fulfil the duty of notification as a group, and give notification of the total participation, the identity of the individual members, the nature of the agreement and the representation.

For quoted Swiss companies, regulations regarding public take-over bids are set forth in the SEL. Subordination is optional. The companies may, prior to the quotation of their equity stock, lay down in their bye-laws that a purchaser is not obliged to make a public take-over bid. They can also do this at a later time, as long as this does not adversely affect the shareholders within the meaning of Art. 706 of the Swiss Code of Obligations.

The newly-introduced compulsory bid was one of the most controversial regulations, as was shown by the debates in parliament. Whoever, directly, indirectly or in common accord with third parties, acquires equity stock and thereby, together with the stock he already possesses, exceeds the threshold of 33 1/3% of the voting rights, whether these are exercisable or not, of a target company must submit a take-over bid for all the quoted equity of a company. Exemptions from the bid requirement are possible, and may be granted by the FBC.

Should the bidder, after expiry of the bid period, hold more than 98% of the voting rights of the target company, he may request from the court within a deadline of 3 months that the remaining equity stock be declared void. The bidder must commence legal action against the company for this purpose. The remaining shareholders may join the proceedings.

Mere portfolio managers do not fall under the scope of the stock exchange law.

The SEL is a skeleton law. The details regarding the granting of licences, which are of great importance for the security dealers (minimum capital, extent of human resources), will be set forth by an Implementing Ordinance to be issued by the Federal Council.

Dr. Peter Herzog - KPMG Fides, Zurich

Swiss Federal Law on Stock Exchanges and Trading in Securities

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.