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First arrest in relation to Swissfirst affair

The headquarters of Siemens Switzerland in Zurich

(Keystone Archive)

A pension fund manager at Siemens Switzerland has been arrested in connection with the ongoing investigation into the merger of banks Swissfirst and Bellevue.

In a statement on Friday, Siemens Switzerland said the manager was placed in custody after being questioned for allegedly accepting kickbacks. On Saturday, Swissfirst rejected all accusations.

"The manager was questioned over the last two days by Zurich police, who decided to place him in custody on Friday afternoon," said Charles Breitenfellner, spokesman for Siemens Switzerland.

Breitenfellner was unable to confirm whether the person was being held directly in relation with the Swissfirst affair.

The merger of banks Swissfirst and Bellevue is being investigated by Swiss authorities on suspicion of illegal insider dealing.

Pressure

Swissfirst has been under pressure recently because of recent charges that some of its former chief executive's deals may have been illegal.

The head of Swissfirst, Thomas Matter, stepped down on August 28 amid increased scrutiny of his role in the recent SFr300 million ($240.6 million) merger between the two banks.

Federal and cantonal authorities are looking into why pension funds sold stock ahead of the merger, thereby depriving themselves of substantial gains.

Swiss authorities are investigating Matter's role in the run-up to the merger, particularly allegations he had talked to several pension funds into selling Swissfirst shares back to the company without providing enough information about the purpose of the transaction.

The bought-back Swissfirst shares were later used for the merger. Matter denies the charges.

Swiss Finance Minister Hans-Rudolf Merz has recently said the Swissfirst case highlights the need to tighten insider knowledge rules. The Swiss Bankers Association has also called for more stringent regulations.

swissinfo with agencies

In brief

The Swissfirst and Bellevue banks announced their merger on September 12, 2005.

Ahead of the merger, several pension funds sold their shares in Swissfirst to the bank's chief executive, Thomas Matter.

Trading in Swissfirst shares increased dramatically at the end of last August and before the merger announcement.Shares in Swissfirst soared by almost 50% after the merger announcement.

In mid-August the public prosecutor of canton Zurich announced that it had opened criminal investigations against Matter and several pension fund managers.

On August 28, Matter announced his immediate resignation.

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Insider trading

There are two types of insider trading – legal and illegal.

Illegal insider trading is the buying or selling of a security by insiders who possess information that is still not public. This puts insiders (people with for example confidential information about a company) in breach of their fiduciary duty.

A common misconception is that only directors and upper management can be convicted of insider trading. Anybody who has material and non-public information can commit such an act.

Insiders don't always have their hands tied. Insiders legally buy and sell stock in their own company all the time. Trading is restricted and illegal only at certain times and under certain conditions.

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