Revision of the Stock Exchange Act

New Insider Trading Rules

With the revision of the Stock Exchange Act the offense of insider trading is transferred from the Criminal Code to the Stock Exchange Act. The rules have been extensively revised and adapted to international standards and are expected to come into force on 1 April 2013.

1. Expansion of the circle of primary insiders and inclusion of random insiders

Both the current and the new insider trading rules set a high range of punishment for the so-called "primary insiders", and a lesser one for their tippees - the so-called "secondary insiders". Primary insiders are subject to a penalty of up to 3 years of imprisonment (under the new rules: for an economic advantage of over CHF 1 million up to 5 years) or fines. Secondary insiders are subject to a penalty of up to 1 year of imprisonment or fines.

Under the current law, the circle of primary insiders is tightly restricted to officers (directors and top management) and auditors of a stock corporation, civil servants and government officials and in each case their respective assistants. Whoever does not possess these characteristics, can, under the current legislation, only be deemed a secondary insider, that is to say, only the tippee of a primary insider. Those who receive the insider information merely in passing or by chance (e.g., through wrongly delivered email or an overheard conversation), and become "random insiders", are not considered to be even secondary insiders and so do not fall within the scope of the current rules.

The new criminal insider trading rules expand the circle of the primary insiders to anyone who, in whatever capacity, has legitimate direct access to inside information. In particular, employees below the top management level of a company now also come into consideration as primary insiders if, because of their occupation or position, they come into contact with insider information (e.g., employees in the M&A, legal, finance or research departments etc.). Consultants, shareholders and players in the financial industry (e.g., analysts and employees of rating agencies), who have legitimate access to insider information, also fall into the category of primary insider. The new rules also extend the circle of secondary insiders. While this category currently only includes the recipients of tips from primary insiders, the new rules extend the scope to include those who obtain inside information by way of a felony or a major (but not minor) misdemeanour. And finally, as a novelty under the new legislation, temporary insiders are punishable, albeit with a relatively small penalty of fines up to CHF 10'000.

Under the new rules legal persons still do not generally qualify as offenders, unless the act is that of an undetermined perpetrator whose identity cannot be established due to the poor internal organization of his employer (Article 102 of the Criminal Code). This could, for example, be the case if it is established that a tippee could only possibly have received the relevant insider information from a primary insider within a particular department or a particular body, but because of disorganization the said primary insider is not identifiable.

2.  Extending the concept of insider information

With the use of the term "insider information" the insider trading rules now conform more closely with the terminology of the EU. The definition of insider information covers any confidential information which, if disclosed, is likely to significantly affect the trading price of securities which are listed on an exchange or an exchange-like facility in Switzerland. Under the new law the insider information must no longer necessarily relate to the subject matter listed company; according to the Federal Council it would seem that even price-sensitive confidential information originating entirely outside the relevant listed companies (e.g., industry-relevant fundamental decisions of authorities or the discovery of new, or depletion of, existing sources of raw materials) will be considered insider information. The new law, like the existing rules, does not require that the insider information be price-sensitive for the company where the insider operates; resulting in whoever, for example, in the course of their function or activity learns that his employer is about to sign a contract with a company listed in Switzerland, which could affect the latter’s share price, being deemed an insider.

3. Expansion of insider trading offence

The offenses under the current law will remain offenses in the future. New is that the mere recommendation by a primary insider, based on his insider information, to trade in Swiss-listed securities is a criminal insider offense, even if no insider information was disclosed thereby. In addition, under the new law an insider offense can also be committed by transactions with all derivatives of securities listed in Switzerland, including in particular, with listed, non-standardised OTC products. The only derivatives covered by the current law are options.

4. Qualification as a predicate offense for money laundering

The range of punishment for primary insiders under the new rules has been extended from up to three to up to five years' imprisonment where, as a result of the insider trading, they achieve an economic advantage of over CHF 1 million (so-called "qualified insider trading offense"). Thus, the qualified insider trading offense becomes a felony and therefore, newly, a predicate offense for money laundering.

5. New law enforcement competence

Offences against the prohibition of insider trading committed under the new rules will be prosecuted by the Federal Attorney General and decided by the Federal Criminal Court and ultimately the Federal Supreme Court. The cantonal authorities and courts will no longer be competent.

6. Extended application of regulatory penalties

Simultaneously with the insider trading criminal law the FINMA supervisory role has also been extended. Under the new law FINMA may proceed not only against the supervised institutions (e.g., banks, fund management companies and securities dealers), but also against all market participants who are suspected of insider trading crime, whereby in the regulatory process, unlike the criminal procedure, fault is not important. Regulatory and criminal procedure may be pursued in parallel, but it is expected that the regulatory approach will be preferred as a rule, because it will generally lead to faster results than criminal proceedings. As against parties it does not supervise, FINMA can issue sanctions in the form of declaratory rulings, their publication and confiscation of profits. Against supervised parties FINMA still has all further sanctions at its disposal (i.e. occupational ban and revocation of regulatory approval).


Public companies will, also under the new law, not be held criminally liable for the insider trading of their officers and employees as long as the perpetrators are identifiable. However, it is now to be expected that FINMA will use its extended responsibility and instigate supervisory proceedings against such companies. What's more, insider trading cases will continue to frequently prompt the Swiss stock exchange (SIX) to check whether the company has met its ad hoc reporting requirements.

It is therefore specifically recommended that employees be fully informed in advance about the strengthening of the insider criminal law, in particular the extensions of the primary insider circle and the acts constituting the offense. In addition, all insider trading regulations, codes of conduct, compliance manuals and any instructions which were issued with the employment contract must be updated and adapted in light of the new rules. Where public companies set blocked times for equities trading around reporting dates, it should be examined whether due to the new rules the, usually low, number of people blocked from trading should be expanded. Without such adjustments to employee information and internal regulations, listed companies run the risk that its employees use the outdated regulations and instructions of the company as justification for any offences they might commit under the new law.

Financial intermediaries who fall under the scope of the Anti-Money Laundering Law should clarify the economic background and the purpose of any transactions or business relationships that appear unusual, and in particular if they suspect that they stem from insider trading.


Dr. Robert Bernet
Dr. Robert Bernet, LL.M.

Attorney at Law

Dr. Felix Egli
Dr. Felix W. Egli, LL.M.

Attorney at Law