Securities issuers are obligated to publish information related to rate changes in a timely manner. These disclosures are known as ad hoc announcements.
Ad hoc announcements are meant to prevent company-specific information that may influence the price of shares and other securities from being withheld from shareholders in favor of “insider” traders. Insider trades take advantage of unpublished information to benefit a small number of shareholders.
Ad hoc announcements are meant to prevent this scenario by providing the same information to all stock market participants at the same time. The ad hoc announcing of rate-relevant information allows all participants to trade on a level playing field, improves market transparency and helps prevent insider trading.
In Switzerland, equality among shareholders in capital markets is required by Article 53 of the SIX Swiss Exchange (SWX) listing rules. The definition of the term “potentially price-relevant factor” is key here. It includes all factors which, until the time of publishing, are known only to insiders and which have the potential to affect rates. Financial figures, buyout offers, mergers, takeovers and shifts in top management are all examples of corporate information which can affect share prices.
All securities issuers in Switzerland are therefore required to report all price-relevant information to the SWX Swiss stock market, two information services and two nationally distributed Swiss newspapers in a timely manner. Other criteria also apply.
In the event that a careless infringement on ad hoc announcing rules occurs, SIX can hold the offending company liable to a fine of up to 1 million Swiss francs. If the offense is deemed to have been intentional, a fine of up to 10 million may apply.
The general rules that apply to insider trading depend a lot on how the term “price relevant factors” is used: the term leaves a lot of room for varying interpretations. In practice, the limits of what factors actually fall under these rules are regularly called into question.
SWX has extended Article 53 of its listing rules, which now defines factors worthy of ad hoc announcement as those which could substantially affect share prices. If the development in question could potentially impact an average shareholder, it must be reported.
On an individual basis, whether the information would affect a stock market trader’s decision to buy or sell securities would be the main criteria used to define ad hoc announcement-worthy developments. But in practice, defining an “average trader is difficult”, as is measuring the potential impact of specific factors on traders’ decision to buy or sell shares.
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