8.9 Exploitation of Insider Information and Market Manipulation
Compliant trading is a key factor in safeguarding the reputation of the Swiss Stock Exchange and the image as a financial centre. Surveillance & Enforcement surveils the Swiss Stock Exchange to ensure that any insider trading, price and market manipulation and other irregular activities and regulatory breaches are detected.
As insider information qualifies confidential information that would have a significant impact on the price of a security if the information were disclosed. Critical issues for companies include takeover situations and communication with significant shareholders (if closely related to the company). Caution is also called for situations when block trades, trading with own shares or share buybacks are involved. The laws are relatively broad, and in individual cases circumstantial evidence may be sufficient for a conviction.
The Surveillance & Enforcement department of SIX Exchange Regulation AG monitors price formation and trading on the exchanges of SIX so that insider trading, price and market manipulation and other violations of statutory and regulatory provisions can be detected. In the event of suspected violations of the law or other irregularities further investigations will be conducted. If regulations are breached, SIX Exchange Regulation AG initiates sanctions proceedings.
If violations of the laws are suspected, the findings of the investigation are reported to FINMA. FINMA’s responsibility in the area of insider trading and market manipulation is not limited to individuals and legal entities subject to FINMA regulation and prudential supervision. This means that FINMA can in principle take action and order measures against any person in violation of the laws.
FINMA investigates behavior relevant from a supervisory law perspective and provides information relevant under a criminal law perspective to the law enforcement authorities, e.g. the Office of the Attorney General. The Office of the Attorney General has effective tools to act, and if the evidence provided is sufficient, it can, for example, obtain search warrants and have access to mobile telephones and computers. The sanction measures range from a professional ban to fines to imprisonment of up to five years depending on who is imposing them. FINMA can also issue declaratory rulings, confiscate or order the disgorgement of illegally generated profits and publish final rulings.
The issuers are responsible for defining proprietary rules and procedures regarding insider information. Insider lists must be drawn up for potentially delicate issues, and a confidentiality agreement must be signed with every person involved. Companies are responsible for ensuring that the necessary control mechanisms have been installed and that criminal behavior is detected. The best protection for the company is a good governance of inside information.
Issuers have the possibility to notify Surveillance and Enforcement of SIX Exchange Regulation AG about trading conspicuities in its securities (➔ ser-ag.com/en/contacts/contact-enc.html).
Further Information
Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading (Financial Market Infrastructure Act, FinMIA), in particular Art. 142 et seq. and Art. 154.➔ fedlex.admin.ch/eli/cc/2015/853/en
FINMA Circular 2013/8 «Market conduct rules»
➔ finma.ch/en /~/media/finma/dokumente/dokumentencenter/myfinma/rundschreiben/finma-rs-2013-08-01012021_de.pdf?la=de