Watchdog demands insider trading crackdown

Reported cases of money laundering are down.

The laws regulating insider trading should be tightened to reflect current market conditions, according to the Swiss Federal Banking Commission (SFBC).

This content was published on April 27, 2006 minutes

The watchdog wants to remove a clause in the current law restricting prosecutions to mergers and acquisitions. This would allow criminal sanctions to be extended to abuse of information affecting profit warnings.

Speaking at the annual SFBC conference in Bern on Thursday, chairman Eugen Haltiner said that unethical conduct in the market was "unacceptable".

"In Switzerland we have some issues to resolve. Compared with the general international environment such offences [insider trading] are not being identified thoroughly enough," he told swissinfo.

"We should really make clear that from an ethical standpoint insider transactions are prohibited and that we really have effective enforcement."

Haltiner revealed that the SFBC also has its eye on the flourishing hedge fund industry that is becoming increasingly active in the field of mergers and acquisitions.

"I am in favour of innovation but we need to understand the product, its structures and processes. We must identify the risks and how can we measure them so that we can take steps to control the whole thing," he told swissinfo.

Concessions over whistle-blowing

At the same time the SFBC has substantially watered down a draft circular it issued to the Swiss Bankers Association last year proposing further regulation to bolster internal surveillance and control.

A revised circular due to come into force on January 1, 2007 drops proposals to further encourage whistle blowers and concedes ground on the issue of ensuring the independence of boards of directors.

"The concessions are not really material. I do not want to write a precise rulebook prescribing what you have to do, but I want to set broad principles that give flexibility for banks to solve solutions," Haltiner said.

The number of suspicious money transactions reported to the Money Laundering Reporting Office of Switzerland (MROS) dropped for the second consecutive year in 2005, according to figures released on Thursday. The number of reports from banking institutions also declined for the first time since the duty to report was introduced in 1998.

However, the number of suspicious cases reported under the SFBC's Money Laundering Ordinance, that do not come under the auspices of MROS, more than doubled last year. And there was a 28 per cent increase in suspicious transactions reported under a separate Swiss law.

swissinfo, Matthew Allen

In brief

Haltiner said he welcomes government plans, announced in February, to create a new umbrella body to coordinate the work of the SFBC, the Federal Office of Private Insurance and the Money Laundering Control Authority.
The body would be called the Federal Financial Market Supervisory Authority and would bring Switzerland more in line with other European countries, according to Haltiner.

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Key facts

The number of suspicious money transactions reported to MROS in 2005 declined by 11.2% from the previous year to 729 (821 in 2004)
Reports to MROS from the banking sector declined by 13.8% (47 fewer reports than 2004)
The total value of assets blocked in Switzerland fell from SFr779 million ($612 million) in 2004 to SFr680 million in 2005 (a 13% drop)

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