9.9 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 center.
Insider information refers to confidential information whose disclosure would have a significant impact on prices of securities.
From a corporate perspective, takeover situations and communication with significant shareholders who may be closely related to the company are particularly critical. In situations with block trades, trading with own shares or share buybacks, special caution is adivsed. The laws are relatively broad and in individual cases circumstantial evidence may be sufficient for a conviction.
The department “Surveillance & Enforcement” of SIX Exchange Regulation AG supervises price formation and trading on the trading venues of SIX so 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 and the investigation results, if applicable, reported to the Swiss Financial Market Supervisory Authority (hereinafter “FINMA”) and/or the competent prosecution authority. If regulations are breached, SIX Exchange Regulation AG may initiate sanctions proceedings.
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 allows FINMA in principle to take action and impose measures against any liable person or corporate institution in the area of insider trading and markets manipulation. FINMA investigates behavior relevant from a supervisory law perspective and provides information relevant under a criminal law perspective to the competent prosecution authorities, e.g. the Office of the Attorney General. The Office of the Attorney General has effective tools and is authorized if the evidence provided is sufficient, to carry out measures such as search warrants or access to mobile phones 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. For potentially sensitive matters, it is advisable to maintain insider lists and to have confidentiality agreements signed by all parties involved. Companies are responsible for ensuring that the necessary control mechanisms have been implemented in order to detect criminal behavior. The best protection for the company is a good and sufficient governance regarding inside information.
Issuers have the possibility to notify Surveillance & 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