Swiss Bearer Bonds and Market Regulatory Concerns

Swiss bearer bonds have been a topic of interest for many due to their unique characteristics and regulatory concerns. They are essentially securities that can be transferred freely without the need for endorsement or delivery of the physical bond.

The lack of transparency and accountability in the Swiss bearer bond market has raised concerns among regulators. The anonymity of these bonds makes it difficult to track their ownership and movement.

In 2014, the Swiss Financial Market Supervisory Authority (FINMA) implemented stricter regulations for the Swiss bearer bond market. This move was aimed at increasing transparency and preventing money laundering.

FINMA's efforts to regulate the market have been ongoing, with a focus on ensuring that issuers comply with anti-money laundering regulations.

Beneficial ownership transparency is a crucial aspect of Swiss bearer bonds. The Financial Action Task Force (FATF) plays a key role in combating money laundering and terrorist financing, and its recommendations have led to significant changes in Switzerland's regulations.

In 2012, the FATF found that Switzerland's national regulations were not fully compliant with its 40 recommendations. As a result, Switzerland introduced the Federal Act for Implementing Revised FATF Recommendations of 2012 (FATF Act) on July 1, 2015.

The FATF Act aimed to improve transparency provisions governing bearer shares, including a requirement for purchasers to report the acquisition of bearer shares within one month. This applies regardless of the number of shares acquired.

Shareholders who acquire 25% or more of a company's share capital or voting rights must notify the company of the beneficial owner's first and last name and address. Companies must also maintain a register of bearer share holders and beneficial owners.

These measures have been in place since the FATF Act came into effect, and non-compliance can result in substantial private and criminal law sanctions.

The Swiss government has been criticized for its lack of transparency in the issuance of Swiss bearer bonds.

These bonds were often used for illicit activities due to their anonymous nature.

The Swiss government has since implemented stricter regulations to prevent the misuse of bearer bonds.

Market Infrastructure is a crucial aspect of the financial ecosystem, providing the necessary framework for buying and selling securities. It includes exchanges, clearinghouses, and depositories, which are responsible for facilitating transactions and maintaining the integrity of the market.

Exchanges, such as the New York Stock Exchange (NYSE), are the primary platforms where buyers and sellers meet to trade securities. The NYSE is the largest stock exchange in the world, with over 2,400 listed companies.

Clearinghouses, like the Depository Trust & Clearing Corporation (DTCC), act as intermediaries between buyers and sellers, ensuring that trades are settled promptly and efficiently. The DTCC processes over 100 million trades per day.

Depositories, such as the Federal Reserve, provide a safe and secure environment for the storage and transfer of securities. The Federal Reserve holds over 10% of the world's gold reserves.

Proxy voting is a common practice in corporate governance, allowing shareholders to vote on behalf of others.

Shareholders can use their proxy votes to influence the direction of the company, such as electing board members or approving executive compensation packages.

Proxy voting can be done in person, by mail, or online, and the deadline for submitting proxy votes varies by company.

In the US, the Securities and Exchange Commission (SEC) requires companies to disclose proxy voting information to shareholders.

The SEC also sets rules for proxy voting, including requirements for proxy statements and voting instructions.

Proxy voting can be a powerful tool for shareholders, but it can also be complex and time-consuming.

Bearer shares are a type of share that doesn't have a registered owner. In Switzerland, companies with bearer shares need to assess if they meet certain exceptions that allow them to continue issuing these shares. If they do, they need to register this fact in the commercial register by May 1, 2021.

Companies that can no longer issue bearer shares should convert them into registered shares. This conversion must be reflected in the articles of association and the commercial register. Shareholders who hold bearer shares in non-listed companies need to review their filings and cure any deficiencies immediately.

If shareholders fail to comply with the transparency requirements by May 1, 2021, they may be expropriated and lose their rights without compensation. Shareholders holding more than 25% of the share capital in any company should be particularly cautious and take immediate action to comply with the new regulations.

In unlisted joint stock corporations, shareholders holding bearer shares or more than 25% of the share capital must review their existing filings and cure any deficiencies immediately.

Shareholders who fail to comply with the transparency requirements by May 1, 2021, must apply to the court for registration in the commercial register.

If the additional five-year deadline is missed, they may be expropriated and lose their rights without compensation.

To avoid this, it's essential to ensure that corporate housekeeping instruments, such as the share register and register of reported beneficial owners, are compliant with the new criminal sanctions.

Here's a summary of the key actions for unlisted joint stock corporations:

Bearer shares are often used in private equity and venture capital transactions.

They are usually issued in exchange for a cash investment or other consideration.

Bearer shares are not registered in the shareholder's name, but rather in the name of the bearer.

This means that ownership is not recorded, and the shareholder's identity is not disclosed.

Bearer shares can be transferred by simply handing over the share certificate.

No formalities, such as filling out paperwork or notifying the company, are required.

This can make bearer shares easier to transfer than registered shares.

However, this also means that the company may not be able to verify the identity of the shareholder.

Bearer shares are often used in jurisdictions with strict securities laws or regulations.

This is because bearer shares can provide a level of anonymity that is not available with registered shares.

Some countries have even banned bearer shares due to concerns about tax evasion and money laundering.

The tax implications of bearer shares can be complex and varied.

In some jurisdictions, bearer shares may be subject to a withholding tax on dividends.

In other cases, the bearer shareholder may be required to pay a tax on the value of the share.