All questions

Public enforcement

i Forms of action

In the area of public enforcement of securities laws, some of the most relevant provisions relate to violations of the prospectus regime, insider trading and market manipulation. Breaches of the pertinent provisions may result in administrative measures or criminal sanctions.

Violations of the prospectus regime

Article 90 FinSA provides for penal sanctions for violations of the FinSA's provisions regarding prospectuses and key information documents. According to Article 90(1) FinSA, a person who intentionally provides false information or omits material facts in the prospectus or key information document or who fails to publish the prospectus or the key information document by the beginning of the public offer at the latest is liable to prosecution. According to Article 90(2) FinSA, a person who intentionally fails to make the key information document available prior to subscription or conclusion of the contract is also liable to prosecution. According to Article 92 FinSA, these provisions do not apply to persons supervised by FINMA and persons working for them. If such persons violate the prospectus regime, they may be subject to supervisory measures taken by FINMA instead.74

Insider trading

Insider trading is the subject of supervisory provisions and penal provisions. As regards supervisory law, Article 142(1) FMIA prohibits any person from exploiting information that they know or should know is insider information by trading securities admitted to trading on a trading venue in Switzerland, from disclosing such information to others, and from exploiting such information by making recommendations regarding securities admitted to trading on a trading venue in Switzerland to others. Article 154 FMIA prohibits insider trading on a criminal law level. Article 2 letter j FMIA defines insider information as confidential information whose disclosure would significantly affect the prices of securities admitted to trading on a Swiss trading venue. To determine whether this is the case, Swiss courts apply the 'reasonable investor test'.75

Thus, the prevention of insider trading generally is a matter of public enforcement. Whether insider trading may also be the basis of a tort claim according to Article 41 CO (see above) and, consequently, be a matter of private enforcement is a controversial issue.76

Market manipulation

Market manipulation is also the subject of supervisory provisions and penal provisions. As regards supervisory law, Article 143(1) FMIA prohibits any person from publicly disseminating information and from carrying out transactions or purchase or sale orders that he or she knows or should know give false or misleading signals regarding the supply, demand or price of securities admitted to trading on a trading venue in Switzerland. Article 155 FMIA prohibits market manipulation on a criminal law level. The scope of application of the penal provisions is rather narrow and covers wash sales and matched orders only.77

Thus, the prevention of market manipulation generally is a matter of public enforcement. Whether market manipulation may also be the basis of a tort claim according to Article 41 CO (see above) and, consequently, be a matter of private enforcement is a controversial issue.78

ii Procedure

With respect to the administrative measures mentioned above, FINMA may initiate enforcement proceedings. These proceedings are governed by the Federal Act on Administrative Procedure.79 In the case of violations of the prospectus regime according to Article 90 FinSA, penal proceedings may be initiated against the offender by the Federal Department of Finance in application of the Federal Act on Administrative Criminal Law.80 In contrast, the Office of the Attorney General of Switzerland is competent for the prosecution of violations of the penal provisions regarding insider trading and market manipulation. In these cases, the procedure is governed by the CrimPC.81

iii Settlements

Swiss law does not provide for a settlement procedure involving FINMA. In practice, however, FINMA may be amenable to discussing a resolution by which satisfactory corrective action is taken, be it with or without a formal order issued by FINMA.

There is limited room for settlements in criminal proceedings. Prior to being charged before the penal court, the accused may request the prosecutor to conduct an accelerated procedure provided the accused admits the matters essential to the legal appraisal of the case and recognises, if only in principle, the civil claims, and only if the prosecutor requests a sentence of not more than five years of custody.82

iv Sentencing and liability

Article 29 et seq. FINMASA provide FINMA with various supervisory instruments. FINMA may, for example, collect required information and documents, order appropriate measures to restore compliance with the law, issue a declaratory ruling or publish final rulings. In cases of serious violations of supervisory provisions, FINMA may prohibit responsible persons from practising a profession for up to five years or confiscate any profit that a supervised person or entity or a responsible person in a management position has made due to the violation.

As regards criminal provisions, a fine of up to 500,000 Swiss francs may be imposed on a person violating the prospectus regime according to Article 90(1) FinSA and a fine of up to 100,000 Swiss francs in case of violations of Article 90(2) FinSA. Insider trading according to Article 154 FMIA and market manipulation according to Article 155 FMIA may result in a monetary penalty or imprisonment for up to three years. If the profit exceeds 1 million Swiss francs, the duration of imprisonment may be up to five years.