Revised SIX rules on ad hoc publicity
On July 1, 2021, revised regulations of SIX Swiss Exchange on ad hoc publicity and corporate governance will enter into force. The revised regulations will provide a number of changes relevant to issuers of listed securities on the SIX Swiss Exchange. The most important are as follows:
- The SIX will abolish the obligation to disclose «per se» price-sensitive facts, i.e., facts that have to be disclosed regardless of whether they are capable of triggering a significant change in the share price.
- Public announcements that include price-sensitive facts have to be labelled «ad hoc announcement pursuant to article 53 LR» to distinguish them from other announcements.
- Issuers will have to establish internal rules and procedures governing the process to decide when the publication of a price-sensitive fact (e.g., a planned M&A transaction) is postponed.
Abolition of «per se» price-sensitive facts
Subject to certain exceptions, the rules on ad hoc publicity of SIX Exchange Regulation (SER) require that issuers disclose price-sensitive facts (also known as material non-public information) that have arisen in their sphere of activity. Disclosure must take place without delay through specific information channels.
In its practice, SER assumed – without a regulatory basis – that certain facts were price-sensitive as such («per se»), i.e., that they always qualified as price-sensitive, irrespective of the circumstances of the individual case. The new rules now clarify that there are no such «per se» price-sensitive facts, with one exception: annual and interim financial reports must always be published by way of an ad hoc announcement. In all other cases, the issuer must decide on a case-by-case basis whether or not a fact is price-sensitive.
This rule change formally puts an end to the previous practice that all changes on the board of directors and top-level management are «per se» price-sensitive. In the future, the issuer must analyze the price-relevance of the specific change, as is the case for any other corporate event. This welcome clarification will simplify key personnel decisions and changes as well as negotiations with new executive committee members.
Labelling as «ad hoc announcement»
As from July 1, 2021, announcements that include price-sensitive facts must be explicitly labeled as «ad hoc announcement pursuant to article 53 LR» (so-called flagging). This requirement already applies in other European jurisdictions.
Announcements primarily for marketing purposes must not be published as ad hoc announcements. SER announced that misuse of flagging may be sanctioned.
Duty to establish internal rules governing the process for postponing disclosure
An issuer can postpone disclosure of certain price-sensitive facts (such as a planned M&A transaction) if, among other things, it can ensure that the fact remains confidential. Under the new rules, issuers have to establish adequate and transparent internal rules or processes to this effect. In particular, the issuer must take organizational measures to ensure that confidential facts are disclosed only on a need to know basis.
In essence, issuers will need to adopt internal regulations with clearly defined processes and responsibilities. These regulations will require, for example, that insider lists be kept, confidentiality undertakings be obtained or information barriers and other technical safety measures be implemented. Similar obligations for issuers already exist under applicable insider trading laws. While this does not imply a major change in practice, it will nonetheless be important properly to document the internal rules and processes.
Separate index with the ad hoc announcements of the last 3 years on the issuer’s website
Going forward, ad hoc announcements must be posted in a separate directory on the issuer’s website, in chronological order and indicating the date of publication. Also, ad hoc announcements must be available for at least 3 years (previously 2 years).
Filing of ad hoc announcements exclusively via Connexor Reporting
As from October 1, 2021, issuers of primary listed equity securities must submit their ad hoc announcements to SER exclusively on the electronic reporting platform «Connexor Reporting».
Disclosure of general blackout periods in the corporate governance report
As a new rule, information on general blackout periods must be provided in the issuer’s corporate governance report, which forms part of the annual report. The revised SIX directive on information relating to corporate governance requires the disclosure of deadlines, addressees, scope and any exceptions to the general blackout periods, among other things. Special blackout periods, e.g., when ad hoc disclosure is postponed, do not need to be published.
Revised definition of price sensitivity
The new definition reads as «facts whose disclosure is capable of triggering a significant change in market prices» (previously: «facts which are capable of triggering a significant change in market prices»). This welcome amendment aligns the definition of price sensitivity under the rules on ad hoc publicity with Swiss insider trading laws. It does, however, not entail a substantive change. Similarly, the deleted term «potentially» [price-sensitive] in the title is a purely editorial adjustment.
Issuer’s ex-ante assessment of price sensitivity as a discretionary decision
As previously, a price change is deemed significant if it is considerably greater than the usual fluctuations in the issuer’s share price. Under current practice, the issuer must assess ex ante whether or not a fact is price-sensitive in the specific case. This is now codified in the SIX rules. As today, there will be no fix percentage or numerical thresholds that indicate the existence of a price-sensitive fact.
The new rules further provide that the issuer makes its decision using its discretion, taking into account the company’s internal governance regulations. In our view, this gives issuers a decision-making latitude similar to the business judgment rule in corporate actions: if the decision-making process has been properly conducted and took place on an informed basis, SER should exercise restraint when reviewing the issuer’s decision. The company’s internal governance regulations can be observed, even if this means that the decision-making process requires some time, as long as the disclosure obligation is fulfilled in a «timely» manner.
Reference to the «reasonable» investor
In connection with the assessment of price sensitivity, the new rules refer to the investment decision by a reasonable investor (previously: average investor). The term implies a rationally acting person with knowledge of the financial market, but not a professional investor. Again, this welcome amendment serves to align the rules on ad hoc publicity with Swiss insider trading laws and international standards.
Circular No. 1 of the Issuers Committee
The new circular no. 1 of the Issuers Committee dated March 10, 2021 contains helpful guidance for the interpretation of the amended rules. SER’s commentary on the ad hoc-publicity directive dated November 1, 2011 has not yet been updated.
This Homburger Bulletin expresses general views of the authors at the date of the Bulletin, without considering the facts and circumstances of any particular person or transaction. It does not constitute legal advice. This Bulletin may not be relied upon by any person for any purpose, and any liability for the accuracy, correctness or fairness of the contents of this Homburger Bulletin is explicitly excluded.