Swiss stock exchange SIX wants to use sanctions to encourage the market to comply with its rules. A recent case shows how poorly it all works.
Mistakes happen everywhere, and so market participants on SIX are not immune to them. But what is currently happening in terms of compliance with the rules on Switzerland’s most important capital market is almost beyond the pale.
For example, SIX Exchange Regulation (SER), is responsible for monitoring and enforcing the obligations of listed companies under stock exchange law. They opened an investigation against online bank Swissquote Group. SER conducted a preliminary investigation on June 2, 2022, the exchange announced today (Friday).
The investigation had been triggered by the ad hoc announcement published on June 16, 2021, titled “Swissquote expects record half-year results thanks to exceptional growth.” That notification had not been sent out before trading began, but rather a little later.
“Following the conclusion of a comprehensive investigation process, SER referred a sanction application to the Sanction Commission of SIX Group AG,” it continued. The latter had ordered Swissquote to pay a penalty of 75,000 Swiss francs for negligent breach of ad hoc publicity. In the meantime, the fine has become legally binding.
Reduction of 40 percent
But if you look at Swissquote’s media release on the case, it almost takes your breath away. SIX’s own Sanction Commission ruled that the matter was ‘not as serious’ as SER made it out to be.
In addition, the ‘SIX court’ reduced the requested fine by a high 40 percent to 75,000 Swiss francs. So originally the guardians of the grail wanted 125,000 Swiss francs from Swissquote for their mini-offense.
For mainly technical reasons, the corresponding media release had simply been sent out too late, Swissquote said about the mishap. In its decision, the Sanction Commission therefore ruled that the online bank had not violated the rules of ad hoc publicity to the extent assumed by SER, it added.
Airing of secret
This is all very surprising, because SER, according to its own statements, had carried out a “comprehensive investigation procedure.” It should therefore have adequately assessed the money house’s oversight with the communiqué that was sent out too late.
But Swissquote is making something else publically explosive in addition to all of this. The SIX Sanction Commission itself pointed out in its decision that it could not understand why SER took almost a year after the incident and the opening of the preliminary investigation to open the formal investigation.
That’s pretty tough stuff. Here, as it were, colleagues are complaining about their colleagues at SIX and the issuers apparently have to suffer from these abuses.
Swissquote is specifically making this public. The well-known online bank would not necessarily have had to mention this circumstance in the media information.
However, all this coincides with experiences that muula.ch has also had with SER. For example, the business news portal recently formally inquired with the supervisory authority of the Swiss stock exchange whether the insurer Helvetia had violated ad hoc publicity, because the business medium had the relevant information.
However, SER ponderously stated that it was not possible to provide information on specific issuers outside of a defined process.
If there is a suspicion that an issuer has violated applicable regulations, SER opens a preliminary investigation. However, this is neither communicated nor commented on.
If the suspicions are substantiated in the course of the preliminary investigation, an investigation will be opened and officially communicated, a SER spokesperson told muula.ch.
Big club for banal things
SER also confirmed that there were only two sanctions in the full year 2021 and only three notifications of sanction measures by SER until mid-October 2022. Accordingly, the mini-figures on sanctions per year on SER’s website are correct.
Even if a company contacts SIX and says that it accidentally published a media release too late this morning, SER relies on this rigid procedure. So even for small things, a huge bureaucratic machinery is set in motion.
Hiding behind rules
muula.ch then wanted to know more about the self-regulation of the Swiss stock exchange and asked for an interview. SER, however, refused on the grounds that it answers media inquiries as a supervisory body within the framework of stock exchange regulations and the applicable legal provisions.
The duty of confidentiality does not permit the disclosure of details about issuers or details of violations of regulations in specific cases, a SER media spokesperson told muula.ch in writing.
Chairman vows improvement
Switzerland’s new business news portal, however, did not want to let all this rest and therefore inquired directly with the Chairman of SIX responsible for stock exchange regulation, Thomas Wellauer. According to the organization chart, SER is formally accountable only to him.
At a media event in November 2022, this top manager of SIX was surprised by the complicated procedures of SER as well as the lame communication. The Chairman of the SIX Group promised to look into the matter with the person in charge at SER.
So it remains exciting to see what the outcome will be. In all of this, however, individual market participants are voicing the suspicion that Switzerland is not at all interested in a razor-sharp regulation of the capital market.
To find something quickly on the SER website alone is almost impossible and suggests that Switzerland has conjured up a toothless tiger for self-regulation of the Swiss stock market. But, the Swiss stock exchange would have to defend itself against this impression.
However, even with such trivial mistakes as the late service of the e-mail distribution list to a Swissquote media release, the exchange can deal with itself for perceived eternities since the incident on June 16, 2021, until today’s communication on January 06, 2023.
Jan 06, 2023/kut./ena.