i Sources of law
In Switzerland, there is no single body of law setting out the law of securities. The substantive law regulating securities is codified in the Swiss Code of Obligations (CO).2 Three sections of the CO are of special relevance when dealing with securities: the provisions on companies limited by shares in Article 620 et seq. CO, dealing with equity securities; the provisions regarding negotiable securities (which may include both equity and debt) in Article 965 et seq. CO; and the provisions regarding debt securities issued as bonds in Article 1156 et seq. CO. The procedure for civil litigation is set out in the Swiss Civil Procedure Code (CPC).3 In cases involving foreign parties, international private law comes into play, especially the Lugano Convention (LC)4 (applicable in cases involving parties from most European countries) and the Federal Statute on Private International Law (PIL)5 (applicable in cases involving parties from non-European countries).
Public securities law and public enforcement are governed by the Stock Exchange and Securities Trading Act (SESTA)6 and - for securities that are traded on the main Swiss stock exchange, SIX Swiss Exchange Ltd - the Listing Rules and implementing provisions of the SIX Swiss Exchange.7 The Financial Market Supervision Act (FINMASA)8 establishes the organisation and sets out the supervisory instruments of the Swiss Financial Market Supervisory Authority (FINMA), which is the Swiss authority for the supervision of the financial markets. Concerning criminal liability in general, the Swiss Criminal Code (SCC)9 and the Swiss Criminal Procedural Code (SCP)10 are of relevance.
ii Regulatory authorities
There is no regulatory authority entrusted with the general supervision of securities transactions in Switzerland. Indeed, in the absence of any criminal act, offerings of securities, whether public offerings or private placements, are still not subject to any regulatory oversight.
FINMA has certain limited power in connection with the enforcement of the requirements under the SESTA, in particular relating to disclosure of major shareholdings, insider trading and market abuse. SIX Exchange Regulation, an independent body of the main Swiss stock exchange, assumes a certain supervisory and enforcement role as a private organisation against its members. In the securities context, SIX Exchange Regulation may act in case of certain failures to disclose price-sensitive information or of making false and misleading statements to the capital market (the ad hoc rule).
The Federal Department of Finance has the primary responsibility for the prosecution of failures to notify qualified shareholdings. Prosecution authorities are responsible for criminal proceedings under SESTA and the SCC (see Section III, infra).
iii Common security claims
Very few actions for breaches of securities laws are ever brought to court in Switzerland. Lawsuits brought by investors against issuers or banks for prospectus liability are also infrequent but are probably still the most common securities claim in Switzerland. Only a few precedents are available, though. The reasons are not entirely clear but are likely a combination of the following: (1) Swiss investors tend to be relatively unlitigious; (2) there is no class action or similar instrument and therefore there is a risk of high litigation costs; and (3) many investors have entrusted banks or other financial intermediaries with investment decisions and will therefore sue or claim damages first from their agents before invoking prospectus liability claims against issuers or banks involved in securities offerings.
Due to the absence of a regulator with broad power to police securities offerings, the public enforcement of securities claims is limited to certain aspects of SESTA mainly relating to disclosure of shareholdings, insider trading and market abuse.
II PRIVATE ENFORCEMENT
i Forms of action
The pivotal provision of Swiss substantive law concerning securities litigation is Article 752 CO. This provision governs the liability for the issue prospectus and similar documents and reads as follows:
Where information that is inaccurate, misleading or in...