New Amendments To Swiss Federal Act On Stock Exchanges And Securities Trading Strengthen Rules On Insider Trading, Introduce Other Important Changes

Author:Mr Urs Gnos and Lucas Hänni
Profession:Walder Wyss Ltd

In September 2012, the Swiss parliament approved a draft bill to revise the Swiss Federal Act on Stock Exchanges and Securities Trading (SESTA) and thus create a more stringent capital market criminal and regulatory law (New SESTA).

The New SESTA is expected to enter into force on April 1, 2013.

The revision aims at strengthening the Swiss financial market's integrity and competitiveness by adapting Swiss capital market criminal and regulatory law to international standards, thereby creating rules which efficiently sanction stock market offences and market abuse. The revision also includes amendments to the disclosure law and the takeover law.

This article discusses the key changes to SESTA.

Insider Trading

Currently, insider trading is an offence which can be committed only by the types of persons expressly mentioned in Article 161 of the Swiss Penal Code (SPC) who have access to material, non-public information due to a privileged position (Sonderdelikt), such as directors or managers, auditors or agents of the company (issuer), members of a government agency or public servants, or any auxiliary persons to any of the aforementioned persons. In contrast, employees without direct contact with the decision-makers of such a company, shareholders or persons who incidentally become aware of confidential information are not covered by this provision. This narrow definition was heavily criticised as failing to sufficiently protect the functioning of the financial market and the equal treatment of investors.

In order to improve this situation and to harmonise Swiss law with the law of most EU member states, the definition of insiders has been expanded.

Article 40 New SESTA foresees the following groups of insiders:

A ''primary insider'', in addition to those persons who can already be insiders under current law, can be anyone who, due to his or her activities (such as the head of the M&A department or the legal department) or shareholding, has access to inside information. A primary insider is sanctioned with imprisonment of up to three years, or five years (if qualified, as discussed below), or with a fine (Article 40 paragraph 1 New SESTA); A ''secondary insider'' (currently referred to as a tippee) is a person who receives targeted information from a primary insider (such as a journalist who is informed beforehand about confidential information) or a person who obtains information through the commission of a crime or misdemeanour. A secondary insider is sanctioned with imprisonment of up to one year or with a fine (Article 40 paragraph 3 New SESTA); and A person who accidentally receives inside information (''accidental insider'') is sanctioned with a fine (Article 40 paragraph New SESTA)...

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