“Crime,” an old adage says, “doesn’t pay.”
But whoever came up with that quip probably wasn’t talking about the Swiss financial services industry.
According to a report by Bloomberg this Monday, insider traders in the cheese-loving nation are allowed to roam free and, if they are punished at all, face only minor sanctions for their crimes.
SIX, the operator of the Swiss Stock Exchange, has had four Heads of Market Supervision and Investigation in the past two years. One of them, Jared Bibler, was fired last December for “views of the role” which differed from those of his superiors.
“During my short time at SIX, I worked with teams at both SIX and [the Swiss regulator], true professionals who dedicate each day to uncovering and investigating insider trades,” Bibler told Bloomberg. “However, the resources allocated to these teams were not commensurate with the volume or magnitude of ongoing insider activity on the market. Unfortunately, many insiders trade with impunity in Switzerland.”
FINMA – Not Enough Power?
The Swiss Financial Market Supervisory Authority (FINMA), Switzerland’s largest regulator, doesn’t have much power to punish insider traders.
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Offenders can be banned from certain roles and ordered to repay funds but can’t be fined. Unlike other jurisdictions, the names of insider traders are also not made public.
To be fair to FINMA and the Swiss judicial authorities, Bloomberg’s article seems to be looking for scalps when there aren’t necessarily any there to claim.
Since a 2013 legal overhaul, ten people have been convicted of insider trading. Without the requisite information, it is difficult to say – as Bloomberg implies – that this number is too low.
What is reasonable to criticize is the severity of the punishment meted out to those individuals.
None of them went to prison, and one of them had to pay a fine that was only equal to about CHF 3000 ($3007).
Will we see any changes to that system? Given that Switzerland relies, overwhelmingly, on its banking sector to support itself, the answer is probably not.