Background and responsibilities
The stock exchanges, FINMA and (for matters of criminal law) the cantonal criminal prosecution authorities are regularly involved in proceedings relating to market supervision and the prosecution of stock exchange offences.
As self-regulating institutions, under Article 6 (1) of the Stock Exchange and Securities Trading Act (SESTA) Swiss stock exchanges must monitor their markets to discover insider transactions, price manipulation and other unlawful activity. Where there is any suspicion of such activity or other improprieties, exchanges must inform the supervisor, i.e. FINMA, promptly.
Under Article 6 (2) SESTA it is then the task of FINMA to investigate the unlawful activity or other improprieties reported to it by the exchanges or which it itself suspects. This does not only involves the Market Supervision division but also the relevant division responsible for the prudential regulation of the institution concerned.
FINMA Market Supervision
It is important to distinguish between two separate tasks. Firstly, FINMA has to investigate cases reported to it or which it has taken on, i.e. it must determine whether and to what extent initial suspicions prove to be justified. The preliminary enquiries cover all suspicious transactions and are not restricted to those carried out by regulated institutions or persons. At this stage the aim is to clarify who the actual investors behind the transactions in question are, whether they are subject to FINMA regulation and the nature of any improprieties. If these investigations lead to concrete suspicion that a criminal offence has been committed, FINMA is then obliged under Article 38 of the Financial Markets Supervision Act (FINMASA) to report this to the cantonal criminal investigation authorities. If it turns out that the suspicion relates to regulated institutions or persons, FINMA carries out regulatory proceedings against those financial intermediaries or persons which come under its authority and if necessary orders any appropriate action to be taken. As fit and proper business is a condition of authorisation, FINMA applies higher standards to the financial institutions and persons that come under its authority than those set out in the definition of a stock exchange offence in Articles 161 and 161b of the Swiss Penal Code. This includes dealings that are not themselves punishable as stock exchange offences. The Federal Supreme Court has ruled that a regulatory breach of the principle of good faith can be present even where there has been no criminal offence. The requirements of FINMA regulatory law and its tightly-worded punishment guidelines ensure that institutions and persons regulated by FINMA are subject to stricter rules of behaviour overall in securities dealing than market participants who do not come under FINMA regulation.