SEC Division of Corporation Finance no-action letter: UBS Group AG

U.S. Securities and Exchange Commission
Division of Corporation Finance
-2-
4919-6330-8166 v.7
More specifically, in our opinion, if a Bail-in of Relevant Securities were to occur as described herein, then Section 3(a)(9) of the U.S. Securities Act of 1933, as amended (the “Securities Act”), will provide an exemption from the registration requirements under Section 5 of the Securities Act for the exchange of Relevant Securities for new equity securities of UBS Group AG.1 BACKGROUND For purposes of this request for relief, “Bail-in” refers to the forced and automatic conversion of outstanding Relevant Securities of UBS Group AG into new equity securities of UBS Group AG at the direction of FINMA. UBS Group AG has sold Relevant Securities to U.S. investors in SEC￾registered transactions or in reliance on an exemption from the registration requirements of Section 5 of the Securities Act (such as Section 4(a)(2) of the Securities Act), or outside of the United States in reliance on the Regulation S safe-harbor from registration under the Securities Act. Initial holders may also have resold Relevant Securities to U.S. investors from time to time thereafter. Relevant Securities currently outstanding have been issued under New York law and Swiss law. THE SWISS BAIL-IN FRAMEWORK Under the Swiss bank resolution and restructuring regime, FINMA’s ability to direct the Bail-in of Relevant Securities has been codified in the Bundesgesetz über die Banken und Sparkassen (the “Swiss Banking Act”). Under the Swiss Banking Act, Bail-in may only be ordered by FINMA if it determines that the financial institution has reached the point of non-viability (“Insolvenzgefahr” pursuant to Article 25(1) of the Swiss Banking Act). Under the Swiss Banking Act, in addition to banks, Bail-in powers may also be applied to resolve, among other things, group parent companies of a financial group or financial conglomerate domiciled in Switzerland.2 UBS Group AG, as the Swiss-domiciled parent company of the UBS group of companies, is therefore subject to the Bail-in resolution powers of FINMA. As a result of the single point of entry approach, any Bail-in would occur only at the level of UBS Group AG, including Bail-in 1 We note that the Staff has granted similar no-action relief in connection with the exchange of securities pursuant to bail-in of a UK bank or designated investment firm. Bank of England (April 10, 2026). 2
Article 2bis of the Swiss Banking Act.

U.S. Securities and Exchange Commission
Division of Corporation Finance
-3-
4919-6330-8166 v.7 triggered as a result of financial distress at one or more of UBS Group AG’s operational subsidiaries. Once FINMA has made a determination that UBS Group AG has reached the point of non-viability, FINMA is expressly authorized, among other things, to order a Bail-in as so-called “capital measure” 3, i.e., conversion of outstanding Relevant Securities (issued by UBS Group AG) into new equity securities (issued by UBS Group AG) (a “Conversion Order”).4 Under applicable Swiss law, such Conversion Order would first require the full write-down or conversion, as applicable, of UBS Group AG’s additional Tier 1 debt securities and Tier 2 debt securities in accordance with their contractual terms. Following the full write-down or conversion of UBS Group AG’s additional Tier 1 debt securities and Tier 2 debt securities, the Conversion Order would then require the subsequent full reduction and/or cancellation of UBS Group AG’s outstanding equity securities (including any equity securities resulting from the conversion of any outstanding additional Tier 1 debt securities and Tier 2 debt securities). The Swiss resolution framework provides certain safeguards for affected shareholders and creditors in the event that FINMA declares a Bail-in. Most importantly, FINMA cannot order a Bail-in as resolution measure unless the resolution: (1) is based on a prudent valuation of the bank’s assets and liabilities along with a prudent estimate of the restructuring requirements, (2) is deemed not to be economically worse for creditors than the immediate initiation of insolvency proceedings (referred to as the “No Creditor Worse Off” requirement), (3) takes into account the priority of creditors’ interests over those of the owners and the ranking of creditors appropriately and (4) adequately considers the legal and economic interconnection between assets, liabilities and 3
Article 30b(1) of the Swiss Banking Act.
4
Article 30b(1) of the Swiss Banking Act. In 2013, FINMA stated its preference for a single point of
entry strategy for resolution of globally active systemically important banks (such as UBS Group AG, the largest Swiss bank). As a result, Bail-in of a Swiss financial institution is expected to occur at the level of the ultimate group holding company (in this case, UBS Group AG). In the event that FINMA determines that a financial institution has reached the point of non-viability, FINMA also has the power to order protective measures or if there is either no prospect of successful resolution or the resolution has failed, FINMA also has the power to place the financial institution into insolvency proceedings. This request for relief assumes that FINMA will follow its previously stated preference and implement a single point of resolution strategy with respect to any Bail-in of UBS Group AG.

U.S. Securities and Exchange Commission
Division of Corporation Finance
-4-
4919-6330-8166 v.7 contractual relationships.5 The “No Creditor Worse Off” benchmark assesses the actual treatment against an insolvency counterfactual. In addition, the Swiss Banking Act addresses the order in which a write￾down or debt-to-equity conversion would occur in the event of Bail-in. Initially, any capital (i.e., outstanding equity securities and any debt securities issued by the issuer qualifying as additional Tier 1 capital or Tier 2 capital) must be written-down or converted, as applicable, and cancelled.6

Following the write-down or conversion of capital (i.e., outstanding equity securities and any debt securities issued by the issuer qualifying as additional Tier 1 capital or Tier 2 capital), further write-down or conversion of an issuer’s obligations pursuant to Bail-in would be executed as follows:7

• First, with respect to all subordinated obligations. Based on its
  current capital structure, UBS Group AG would at that point in time not have any outstanding subordinated debt.
• Second, with respect to all obligations designed to qualify for loss
  absorbency in the course of insolvency measures (so-called “bail￾in bonds”). In the case of UBS Group AG, these obligations consist of debt instruments of UBS Group AG that contain contractual bail-in recognition provisions and are intended to be eligible for inclusion in UBS Group AG’s “gone concern” capital and leverage ratios, and this category therefore consists exclusively of Relevant Securities, and all Relevant Securities are included in this category.
• Third, with respect to all obligations not included in the first and
  second categories above (other than deposits) that are not excluded by law from being written-down or converted. In the case of UBS Group AG, this category would include obligations to creditors not 5
  Article 30c(1) of the Swiss Banking Act.
  6 Article 30b(5) of the Swiss Banking Act.
  7
  Article 30b(7) of the Swiss Banking Act. For clarity, this request relates solely to the Bail-in of
  Relevant Securities, which are addressed in category 2 above. We are not requesting any no-action relief or interpretive guidance from the Staff with respect to the potential Bail-in of any other liabilities of UBS Group AG in exchange for new equity securities of UBS Group AG.

U.S. Securities and Exchange Commission
Division of Corporation Finance
-5-
4919-6330-8166 v.7 included in the second category and which are not deposits, such as supplier claims.

• Fourth, with respect to deposits, to the extent exceeding the
  amount protected from being written-down or converted under applicable law. This category is not relevant to UBS Group AG as it is a holding company and does not hold deposits. No approval of shareholders is required for FINMA’s Conversion Order.8

For systemically important banks and group companies of systemically important financial groups or conglomerates (such as UBS Group AG), the Conversion Order takes effect immediately.9 Shareholders and creditors of systemically important banks and group companies of systemically important financial groups or conglomerates have no ability to reject a Conversion Order under Swiss law.10 In connection with Bail-in, FINMA would be required to issue a press release with respect to the material terms of the Conversion Order.11 In addition, UBS Group AG would be required under the Listing Rules of the SIX Swiss Exchange to publish an “ad hoc” press release disclosing the relevant facts of the Bail-in promptly upon its occurrence. Assuming UBS Group AG remains a reporting company under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), and a foreign private issuer at the time of Bail-in, UBS Group AG would also furnish its press release to the SEC on a Form 6-K. FINMA has informed UBS that FINMA will assume ownership for external communication over the resolution weekend and during the resolution period, in alignment with the FDF (Federal Department of Finance), the SNB (Swiss National 8
Article 31(2) of the Swiss Banking Act.
9
Article 31d(1)(a) of the Swiss Banking Act.
10 Article 31a(3) of the Swiss Banking Act.
11 Article 31(4) of the Swiss Banking Act. Disclosures by FINMA regarding the material terms of the Conversion Order could include, for example, (1) the ratio or other methodology for determining the equity securities or claim entitlements to be received by holders of Bail-in liabilities in the forced conversion, (2) the practical process for holders of bail-in liabilities to exercise rights in respect of the equity securities they receive in the Bail-in conversion, and (3) information, to the extent available, on the anticipated capital structure of the issuer following the Bail-in conversion, including the amount of liabilities subject to Bail-in. In addition, affected shareholders and creditors are entitled to inspect the Conversion Order.

U.S. Securities and Exchange Commission
Division of Corporation Finance
-6-
4919-6330-8166 v.7
Bank) and the CMG (crisis management group) members. Assuming that the Bail-in occurs over a weekend, FINMA has informed UBS that FINMA would expect to issue its press release prior to the opening of Asian markets on Monday morning local time (Sunday evening Swiss time) and at the very latest prior to the opening of trading on SIX Swiss Exchange on Monday morning. The UBS press release would be issued promptly after the FINMA press release. As a general principle, each communication event must factor in the possibility of ad hoc disclosures, whether to disseminate price-sensitive information or to address a data leakage. If applicable, any such additional price-sensitive information would be disclosed by UBS through a further ad hoc press release, which would then be furnished to the SEC on Form 6-K. UBS would remain responsible for compliance with its own disclosure obligations in connection with Bail-in. UBS’s ad hoc press release (furnished on Form 6-K) will include a description of the basic elements of the FINMA restructuring plan, including (i) the cancellation of the existing equity securities of UBS Group AG, (ii) the write-down or conversion of the outstanding Additional Tier 1 and Tier 2 capital instruments of UBS Group AG (as a condition precedent to step (iii) hereafter) and (iii) the conversion of the Relevant Securities into new equity securities of UBS Group AG (see category 2 above). The UBS ad hoc press release will also include any other financial or other information that is reasonably available at such time and required to be disclosed, which could include, for example, an initial pro forma balance sheet, and other material information contained in FINMA’s restructuring plan, such as changes in senior management. As a result, U.S. investors would have access to the same information as Swiss investors with respect to the Bail-in. REASONS FOR GRANTING RELIEF Under the Securities Act, all “offers” and “sales” of securities must either be registered with the Commission or qualify for an exemption from the registration requirements of Section 5 of the Securities Act. In our opinion, Section 3(a)(9) of the Securities Act provides an exemption from the registration requirements of Section 5 of the Securities Act with respect to the Bail-in of Relevant Securities into securities of the same issuer. This request for relief is premised upon a conversion directly into new equity securities of UBS Group AG as contemplated by the Swiss Banking Act without the use of interim instruments. There would be no additional consideration paid by holders of Relevant Securities in connection with a Bail-in conversion.

U.S. Securities and Exchange Commission
Division of Corporation Finance
-7-
4919-6330-8166 v.7
The plain language of Section 3(a)(9) sets forth three basic requirements:12

• First, that the exchange is not pursuant to Chapter 11 of the U.S.
  Bankruptcy Code.
• Second, that no commission or other remuneration is paid or given
  directly or indirectly for soliciting the exchange.
• Third, that the exchange is by the issuer exclusively with its
  existing security holders.
  With respect to the first condition above, Bail-in occurs pursuant to the Swiss Banking Act and applicable Swiss law, not pursuant to Chapter 11 of the U.S. Bankruptcy Code. This condition will therefore be satisfied with respect to the Bail-in of Relevant Securities. With respect to the second condition above, Bail-in of Relevant Securities pursuant to a Conversion Order occurs automatically by order of FINMA, without any solicitation of exchange (and therefore no commission or other remuneration paid for any such solicitation). This condition will therefore also be satisfied with respect to Bail-in of Relevant Securities. Finally, with respect to the third condition above, Relevant Securities would be converted directly into new equity securities of the same issuer (UBS Group AG) in a Bail-in ordered by FINMA.13 This request for relief does not address the Bail￾in of Relevant Securities into securities of a different issuer. As a result, all conditions to reliance on the exemption from Section 5 registration provided by Section 3(a)(9) would be satisfied in the case of a Bail-in of Relevant Securities. 12 Section 3(a)(9) of the Securities Act states: “Except with respect to a security exchanged in a case under title 11, any security exchanged by the issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange.” 13 Because the transaction described above contemplates a direct conversion without the use of interim instruments, the ability of a holder to transact in new equity securities following the occurrence of Bail-in is not relevant to the availability of the Section 3(a)(9) exemption.

U.S. Securities and Exchange Commission
Division of Corporation Finance
-8-
4919-6330-8166 v.7
REQUEST FOR RELIEF
For the reasons set forth above, in our opinion, if a Bail-in of Relevant Securities were to occur as described herein, then Section 3(a)(9) of the Securities Act will provide an exemption from the registration requirements under Section 5 of the Securities Act for the exchange of Relevant Securities for new equity securities of UBS Group AG. We hereby request that the Staff advise us that the Staff will not recommend any enforcement action to the Commission in connection with the Bail-in of Relevant Securities as described herein. We note that the general antifraud provisions of the Securities Act and the Exchange Act, including Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, apply to offers and sales of securities. For clarity, we are not requesting any no-action relief or interpretive guidance from the Staff with respect to the general antifraud provisions of the Securities Act and the Exchange Act, including Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. In addition, we note that UBS Group AG is currently subject to the reporting requirements of the Exchange Act. To the extent that UBS Group AG remains subject to such requirements at the time of Bail-in, we are also not requesting any no￾action relief or interpretive guidance with respect to the Exchange Act reporting obligations of UBS Group AG.

---