Market Manipulation and Insider Trading in Switzerland – an overview* (Part II)


Von André Basler

In today’s world market manipulation can occur anywhere, anytime and spread fast over a globally connected system. Therefore it is increasingly important to harmonize the guidelines as well as the definition of market abuse, so criminal activity can be detected and enforced effectively at an early stage through cooperation conducted by Market Authorities and Law Enforcement worldwide.

Last week, we looked at the terms “Capital Markets” and “Securities” and learned about the most common types of market manipulation. The perhaps most known type of illegal market manipulation is insider trading. The term insider information refers to situations when insiders with confidential, not yet public information, about a company use that information to their own or directly related third parties‘ benefit.

Insider Information

More specific, insider information refers to facts including companies’ intentions, as yet unrealized plans, projects and prospects. Facts communicated to third parties, such as knowledge of a financial analysis currently awaiting publication, a large order or purchase, a license or authorization that is to be granted or refused, an upcoming lawsuit of a certain size, an upcoming merger or acquisition as well as a planned terror attack, are deemed to constitute insider information. Possible rumors and speculation on the other hand, irrespective of the source they are derived from, are not defined as insider information. Information must be sufficiently clear and must have a certainty that it may provide a basis for anticipating the future trend in the price of a security.

Information is deemed confidential if it is not generally available through open sources and is instead only available to a restricted group of people irrespective of the size of that group. Information is deemed to be in the public domain if unconnected third parties are able to obtain it from generally accessible sources (internet, media etc.). A rumor does not in principle set aside the confidentiality of specific information.

The question of whether information is price-sensitive, i.e. capable of substantially influencing the market price of securities, is to be decided on a case-by-case basis with reference to whether or not the information is capable of influencing the investment behavior of a reasonable investor who is familiar with the market.(1)

The Swiss Financial Market Supervisory Authority (FINMA)

The Swiss Financial Market Supervisory Authority (FINMA) in Switzerland overviews market regulation, sanctions insider trading as well as market manipulation on the base of the Financial Market Infrastructure Act (FMIA). FINMA enforces the rules on market abuse in the financial market infrastructure ordinance and in particular against all market participants, including legal entities as well as individual participants, regardless of whether or not they are subject to prudential supervision. The Swiss Financial Market Supervisory Authority mostly deals with violations by authorized or unauthorized institutions including their employees on the Swiss securities market, as well as severe market abuse on similar markets in Switzerland and abroad. Besides supervising license holders and enforce market manipulation, FINMA’s remit also includes acting against companies and individuals engaged in financial market activities without the requisite license.(2)

Cooperation of Authorities in the EU and the harmonization of guidelines

To prevent and enforce unlawful behavior in the financial market in Switzerland, FINMA overviews market regulations, and sanctions such behavior on base of the FMIA if necessary. In the European Union the European Securities and Markets Authority (ESMA) oversees the European financial market as an independent EU Authority that safeguards the stability of the European Union’s financial system by enhancing the protection of investors and promoting stable, safe and orderly financial markets in the European Union. Each member of the European Union has its own Financial Market Authority which follows ESMA guidelines and enforces cases of market abuse within their domestic capital markets.

In the year 2015, ESMA conducted an equivalence assessment, whether Switzerland’s supervisory regime for central counterparties corresponds with the European Union’s legal regulations (European Union regulation on derivatives, central counterparties and trade repositories, EMIR). Based on this assessment, the European Commission has recognized Switzerland’s supervision of central counterparties as equivalent. This decision enables Swiss providers to access the markets in the European Union. The European Commission examined the Swiss system in representation of 27 European States (Year 2015).(3)

The cooperation of different authorities is crucial for the success of detection and enforcement of any kind of market abuse. In a global world it is increasingly important to harmonize the guidelines to clearly define market abuse and on the other hand define a “normal” market activity which does not have to be enforced to ensure a broad trading on the world’s financial markets. It will always be a thin line between a too restrictive law and a law which opens up many loopholes that enables criminal activity. So, it is in every Financial Market Authorities’ responsibility to cooperate and to be driven to apply uniform definitions and laws as the financial market is becoming more and more global, thereby slightly losing its clearly defined borders.

Über den Autor

André Basler arbeitet in der Ermittlungsabteilung Wirtschaftskriminalität, Wirtschaftsdelikte 2, bei der Kantonspolizei Zürich.



List of literature

(1) Aggarwal, Rajesh K. and Wu, Guojun, Stock Market Manipulation – Theory and Evidence (March 11, 2003)

* Die meisten Blogbeiträge erscheinen in Deutsch. Ausnahmsweise erscheinen Beiträge auch in Englisch und Französisch, den Sprachen, in denen Schweizer Expertinnen und Experten in der Bekämpfung Wirtschaftskriminalität häufig arbeiten.


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