The Sanction Commission of the SIX Swiss Exchange («SIX») made it clear that the issuer's duty under art. 6 of the SIX Listing Rules to hand over any «relevant documentation» in connection with a SIX investigation does not extend to attorney work product. The Sanction Commission showed its teeth, however, by imposing a record-setting CHF 2 million fine for a single breach of the Listing Rules (delayed ad hoc disclosure). – Issuers should be forewarned that turning a blind eye on the Listing Rules may result in a bigger hit to their wallets.
After a Swiss issuer made a late disclosure of a profit warning, the SIX Exchange Regulation («SER»), the division within the SIX responsible for investigating violations of the Listing Rules, opened a proceeding concerning a potential breach of the ad hoc disclosure obligation. In the course of the proceeding, the SER learned that a Swiss law firm had prepared a confidential report for the issuer's Board of Directors. The law firm had been asked to con-duct an internal investigation into irregularities concerning the profit warning, and its report contained the results of the investigation, along with legal analysis and recommendations. Although the report was presented to the issuer's Board of Directors, CEO and CFO, it remained within the law firm's possession. The SER sought production of said report from the issuer based on art. 6(1) and (5) Listing Rules, according to which:
1 [The SER] may demand that issuers [...] provide all the information that is necessary [...] to investigate any breaches. Issuers [...] may be required to present relevant documentation to this end.
5 Those concerned are obliged to cooperate.
In the instant case, the issuer, while otherwise cooperating with the SER, and having conceded wrongdoing with regard to the delayed profit warning, re-fused to hand over the law firm's re-port to the SER. The SER considered this a further breach of the Listing Rules and the SER's sanction proposal (Sank-tionsantrag) envisioned a CHF 1.75 million fine for the two alleged breaches of the Listing Rules (ad hoc disclosure obligation, art. 53; duty to provide information, art. 6).
The Sanction Commission's Ruling (SaKo 2012-AHP-II/11)
The Sanction Commission, in its ruling of 28 June 2012, confirmed the issuer's breach of the ad hoc disclosure obligation. That conclusion was no surprise given the issuer's prior admission regarding its failure to disclose the profit warning in a...