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SaKo I/2023•SaKo-I/2023
SaKo I/2023SIX Exchange Regulation / Commission des sanctions31 mars 2023
LR 53, DAH 5, 6 | Delayed publication of an ad hoc announcement in connection with the refusal to accept the election as Chairman of the Board of Directors, as well as delayed ad hoc announcements containing price‑sensitive information | Intent and gross negligence
in the procedure Sako I/2023 SIX Exchange Regulation AG (SER) Hardturmstrasse 201 CH-8021 Zurich VS.
X. ☒
[Address]
On 31 March 2023, the Sanctions Commission (SaKo) - [ ... ] (Chairman), [ ... ] (Member), [ ... ] (Member), [ ... ] (Secretary) - decided as follows:
1. The Sanction Commissions (SaKo) has determined that X. _ intentionally violated the ☒ applicable rules on ad hoc publicity and thereby its obligations pursuant to Art. 53 of the Listing Rules (LR) by failing to provide information in a timely manner about the refusal of Person A. __ to accept his election as a member and vice-chairman of the Board of Directors (BoD) of X. _ by means of an ad hoc announcement as soon as it became aware of Person A. _ 's decision in accordance with Art. 5 of the Directive on Ad hoc Publicity (DAH). ☒
2. Furthermore, Sako has determined that X. _ violated with gross negligence the applicable rules on ad hoc publicity and thereby its obligations pursuant to Art. 53 LR by failing to properly disclose price-sensitive facts on [Date a], [Date b], [Date c], [Date d], [Date e], and [Date f], and, as a consequence, failed to comply with Art. 6 DAH.
3. X. _ is ordered to pay a fine in the amount of CHF 125,000. ☒
4. X. _ is ordered to bear the cost of SER for these proceedings in the amount of CHF [ ... ], ☒ and the additional costs incurred by SaKo in the amount of CHF [ ... ]. The total costs to be covered by X. _ amount to CHF [ ... ]. ☒
5. Once the sanction decision has become legally binding, it will be made available in anonymised form on the SER website. Furthermore, the conclusion of the proceedings will be communicated to the public in a media release, with the names of the parties mentioned in the same way as when the file was submitted to Sako.
An appeal can be filed against this decision according to Art. 5.3 para. 2 LR within 20 trading days of this decision being served. Arbitration proceedings shall be instituted upon delivery of a written notice of arbitration against the other party to the lower instance, i.e. the Sanctions Commission ([ ... ]) according to Art. 2.1 of the Rules of Arbitration.
1. X ._ (X .__ , Company or Issuer) is a [ ... ] company that develops drug products and was listed in [Date]. ☒ ☒
2. In accordance with Art. 51 LR in connection with Art. 6 of the Directive on Ad hoc Publicity (DAH), SIX Exchange Regulation AG (SER) oversees the correct publication of media releases containing price-sensitive facts (so called 'ad hoc announcements').
3. In casu, SER initiated a preliminary inquiry against X. _ in accordance with the Rules of Procedure (RP) concerning a possible violation of the rules regarding ad hoc publicity. X. _ responded timely to SER's preliminary inquiry letters. ☒
4. After having considered all the evidence, SER concluded that there were sufficient indications suggesting a violation of the rules on ad hoc publicity. Therefore, on [Date], SER initiated an investigation in accordance with Art. 3.3 para. 1 RP. X. _ responded in a timely manner by letter dated [Date]. On [Date], SER sent X. _ a second letter of inquiry regarding possible violations in connection with the ongoing investigation. X. responded timely by letter dated [Date].
5. X. _ pleaded to enter into an agreement with SER. According to Art. 2.10 para. 2 RP, ☒ agreements are permissible in trivial cases or if they would allow the public to be informed more rapidly or more fully than would be the case with sanctions proceedings concluded in the regular manner. If the party concerned has committed the violation intentionally, no agreement is permitted. In the current case, SER determined that the multiple and possible violations of the stock exchange regulations were not trivial. Furthermore, SER considered some of X. _ 's violations to have occurred intentionally, which makes an agreement inadmissible.
6. X. _ refutes that they acted intentionally: "X. _ acted negligently but not intentionally". ☒ This argument will be addressed below.
7. Sako agrees with SER that an agreement was not possible in this case and that SER was correct to pursue the investigation and to submit a formal sanction proposal.
8. The case deals with various incidents and events that occurred during a prolonged observation period (Month/Year to Month/Year +2 Years). During this period, SER identified and analysed a pattern of communication at X. __ , that violated the rules on ad hoc publicity.
9. The investigation was ultimately expanded to further issues regarding X. _ 's behaviour in terms of corporate communication. The observation period mentioned, the involvement of a third-party X. _ and its [ ... ] reference, and the expansion of the investigation extended the duration of the investigation.
10. On [Date], SER submitted a sanction proposal to Sako dated [Date], including the response of the Company dated [Date].
11. SaKo confirmed receipt of the file on [Date] and granted both parties the opportunity to file further observations, which they did not use.
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12. The parties were notified of the composition of the delegation for the decision on [Date] and no request for recusal was filed.
13. The delegation deliberated on the sanction proposal and made its decision on 31 March 2023.
14. The Company's registered shares are listed in the [Regulatory standard] of SIX Swiss Exchange Ltd (SIX). In [Date], X. _ signed the Declaration of Consent and thereby accepted to be bound by the stock exchange regulations, the LR, the additional rules, implementing provisions and the RP in their latest version.
15. The violation of the LR, any additional regulations thereto or any implementing provisions thereof may be sanctioned with one or more of the sanctions listed in Art. 60 and Art. 61 LR. Sako is the competent body for deciding upon sanction proposals submitted by SER (Art. 3.4 and Art. 4 RP).
16. In this case, the LR and the DAH in their respective versions are applicable. On 1 July 2021, the revised provisions of the LR and the DAH entered into force, introducing, inter alia, the obligation to classify ad hoc announcements as such ("flagging").
17. In establishing the relevant facts for this sanction decision, Sako considered both the exculpatory and inculpatory facts with equal care. All information that serves to determine the facts of the case is subject to free evaluation and deemed to be evidence (Art. 3.1 para. 1 et seq. RP).
18. A review of the partnership between X. _ and Company Y. _ (formerly [Name]) (Company Y. _ ) and the role played by the latter in the development of [Product Name] (also known as [Product Name] or [Product Name]), a drug candidate developed to cure [ ... ], is essential for a better understanding of the events.
19. X ._ is a relatively small [ ... ] company that has only focused on a few potential drugs ☒ over the years. [Circumstance] boosted X. _ 's drug candidate [Product Name] ([Product Name], [Product Name]) as it was seen as a potential cure for [ ... ]. The development of [ ... ] and hopes related to [Product Name] ([Product Name], [Product Name]) had a crucial impact on X. __ 's share price. The share price increased from CHF [ ... ] in mid-[Month/Year] to CHF [ ... ] by the end of [Month/Year] (+6,000%).
20. To speed development and take advantage of momentum, X. _ signed a Collaboration ☒ Agreement with Company Y. _ on [Date] (the "Collaboration Agreement). Company Y. _ is a [ ... ] company headquartered in [Place] and listed on the [ ... ]. According to the terms of the Collaboration Agreement, X. _ would fund research and development, and Company Y. __ would provide the documentation related to the drug candidate mentioned above. As Company Y. _ is (was) the information holder regarding [Product Name] ([Product Name], [Product Name]), especially concerning
clinical studies, study results, admission applications, and granted or declined authority admissions, X. _ is (was) dependent on its collaboration partner when it comes (came) to the development of [Product Name] ([Product Name], [Product Name]) and related information.
21. At 6.50 a.m. CET on [Date], X. _ published a media release and announced that it would propose Person A. __ as a new member of the BoD and as vice-chairman of the BoD at the upcoming Annual General Meeting of [Date original AGM] (AGM Year). Person A. __ is the founder and CEO of Company Y. _ and was therefore regarded as a key person for X. _ 's plans in connection with the development of [Product Name] and accessing the important [ ... ] market.
22. X. _ later had to postpone the AGM [Year] from [Date original AGM] to [Date AGM] and informed the market via a media release on [Date], 10.07 p.m. CET. The agenda remained unchanged.
23. With the media release dated [Date AGM +3 Days] and published at 7.11 a.m. CET, X. announced that all proposals made at the AGM [Year] had been approved. In this media release, X. _ welcomed Person A. _ to the BoD as a new member ("[ ... ]") without any reservation, although his formal acceptance was still missing.
24. Despite his election at the AGM [Year], Person A. _ refused to accept the nomination as a member of the BoD due to various reasons, including: (i) a lack of directors' and officers' liability insurance coverage on the part of X. _ , (ii) a lack of invitations to attend board meetings as a member of the BoD; (iii) an ongoing investigation by SIX (preliminary inquiry by SER); and (iv) advice from his legal counsel not to take office, a decision of which X. _ had been duly informed. On [Date AGM +47 Days], Person A. explicitly advised X. _ by e-mail to inform its shareholders and SIX that he refused to accept the nomination as a new member of the BoD ("[ ... ] Please be advised that in light of your current approach to governance and compliance, I cannot join the board of X. _. Please advise the shareholders and SIX within 24 hours. Good luck, Person A. _ ").
25. At this stage, X. _ did not inform the market or its shareholders of the non-acceptance of Person A. __. Only once shareholders began to complain and ask why Person A. was not mentioned as a member of the BoD in X. _ 's documentation, and why he was not registered in the commercial register, did the BoD of X. _ discuss the incident via e-mail, notably on [Date AGM +115 Days].
26. On [Date AGM +115 Days], Person B. __ , CFO of X. _ , alerted the BoD that due to the election of Person A. _ at the AGM [Year] the market currently believed that he was a member of the BoD, and that the non-acceptance of the election by Person A. "should have [been] announced to SIX and with a PR" the day of Person A. __ 's refusal. He suggested that this information be included in the media release announcing the Extraordinary General Meeting to be held on [Date AGM +153 Days] (EGM Year). Person C ._ and Person D. __ , Chairman and (then) member of the BoD, respectively, agreed to the proposal to wait until [Date AGM +154 Days] and to combine the announcement regarding Person A. _ with the information regarding the results of the [Year] EGM. It was also suggested that the information concerning Person A. __ be
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placed "in small print at the bottom of the EGM Invitation [recte: results]". Moreover, X. expressed the "hope" that SER would "not notice".
27. At 7.03 a.m. CET on [Date AGM +129 Days], X. _ published a media release announcing the EGM [Year].
28. After the conclusion of the EGM [Year] on [Date AGM +153 Days] X. _ shared the media release scheduled for publication the following day with Person A. _ and sought his approval for the wording regarding the non-acceptance of his election as member of the BoD. Person A. __ replied by e-mail the same day, stating that he understood X ._ 's intent to announce their position. He did not, however, give his explicit approval.
29. At 7.03 a.m. CET on [Date AGM +154 Days], X. _ published a media release announcing the results of the EGM [Year]. In the middle of the media release, at the bottom of the passage about the election of Person E. _ as a new member of the BoD, X. announced that "Person A. _ did not accept his nomination [ ... ]".
30. At 10.01 p.m. CET on [Date a], Company Y. _ published the media release "[Title]". At 7.00 a.m. CET on [Date a +5 Days], X. _ published the media release "[Title]", affirming that its collaboration partner Company Y. _ initiated [ ... ] clinical trial. Even if the titles of the media releases differ, the content is congruent. On [Date a -1 Day], X. _ 's share price closed at CHF [ ... ]. The trading volume was [ ... ]. On [Date], X. _ 's share price closed at CHF [ ... ] (-6.25% compared to the previous day). The trading volume was [ ... ].
31. At 2.13 p.m. CET on [Date b] Company Y. _ published the media release "[Title]". At 7.04 a.m. CET on [Date b] X. _ published the media release "[Title (unrelated content)]". At 7.04 a.m. CET on [Date b +1 Day], X. _ published the media release "[Title]." Even if the titles of the media releases differ, the content is congruent. On [Date b -1 Day], X ._ 's share price closed at CHF [ ... ]. The trading volume was [ ... ]. On [Date], X. _ 's share price closed at CHF [ ... ] (-40.38% compared to the previous day). The trading volume was [ ... ]. This event was widely covered by the Swiss financial media.
32. At 1.52 p.m. CET on [Date c] Company Y. _ published the media release "[Title]". At 7.04 a.m. CET on [Date c +1 Day] X. _ published the media release "[Title]". Even if the titles of the media releases differ, the content is congruent. On [Date c -3 Days (last prior trading date)], X. _ 's share price closed at CHF [ ... ]. The trading volume was [ ... ]. On [Date c], X. _ 's share price closed at CHF [ ... ] (+21.07% compared to the previous day). The trading volume was [ ... ].
33. At 12.48 p.m. CET on [Date d], Company Y. _ published the media release "[Title]". On [Date d +1 Day], X. _ published the media release "[Title]" which was flagged as an ad hoc announcement pursuant to Art. 53 LR. Even if the titles of the media releases differ,
the content is congruent. On [Date d -1 Day], X. _ 's share price closed at CHF [ ... ]. The trading volume was [ ... ]. On [Date d], X. _ 's share price closed at CHF [ ... ] (+19.78% compared to the previous day). The trading volume was [ ... ].
34. At 12.48 p.m. CET on [Date e], Company Y. _ published the media release "[Title]". At 7.04 a.m. CET on [Date e +1 Day], X. _ published the media release "[Title]", which was flagged as ad hoc announcement pursuant to Art. 53 LR. Even if the titles of the media releases differ, the content is congruent. On [Date e -1 Day], X. _ 's share price closed at CHF [ ... ]. The trading volume was [ ... ]. On [Date e], X. _ 's share price closed at CHF [ ... ] (+37.5% compared to the previous day). The trading volume was [ ... ].
35. At 1.23 p.m. CET on [Date f], Company Y. _ published the media release "[Title]". On [Date f +3 Days], X. _ published the media release "[Title]", which was flagged as an ad hoc announcement pursuant to Art. 53 LR. Even if the titles of the media releases differ, the content is congruent. On [Date f -1 Day], X. _ 's share price closed at CHF [ ... ]. The trading volume was [ ... ]. On [Date f], X. _ 's share price closed at CHF [ ... ] (-8.21% compared to the previous day). The trading volume was [ ... ].
36. During the investigation, X. _ stated that Company Y. _ repeatedly and wilfully engaged in behaviour that compromised X. _ 's ability to adhere to the ad hoc disclosure obligations under SIX regulations. Even though Company Y. _ knew that X. _ is a publicly listed company in Switzerland regulated by SIX, Company Y. _ had, according to X. __ , repeatedly failed to comply with their Collaboration Agreement, which stipulates inter alia coordinated disclosures in line with SIX regulations. According to X. _ , various attempts were made to compel Company Y. _ to comply with X ._ 's requirements (i.e., legal letters and personal communications), yet none of these attempts was successful. X. _ listed examples of its attempts to compel Company Y. to comply with the Collaboration Agreement. According to X. _ , all attempts have been disregarded. ☒ ☒
37. X. _ is of the opinion that Company Y. _ and in particular Person A. _ have ☒ unilaterally and deliberately continued to disrespect the Collaboration Agreement. Consequently, X. _ filed a lawsuit against Company Y. _. X. _ claims to have always
☒ complied with its obligations under the SIX regulations and the Collaboration Agreement, and no lack of preparedness, willingness to implement procedures or organisational measures on the part of X. __ could be established.
38. Price-sensitive facts are facts that can trigger a significant change in market prices (Art. 53 para. 1 LR). Whether or not the disclosure of a fact can trigger a significant price change must be decided on a case-by-case basis prior to the disclosure of the announcement (Art. 4 para. 2 DAH). The issuer must inform the market of any price- sensitive facts that have arisen in its sphere of activity (Art. 53 para. 1 LR). Disclosure of
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ad hoc announcements must be made to ensure the equal treatment of all market participants (Art. 53 para. 3 LR in connection with Art. 6 DAH).
39. Price-sensitive facts must be disclosed via ad hoc announcement in accordance with Art. 53 para. 3 LR in connection with Art. 6 DAH. The notification by means of an ad hoc announcement is necessary to ensure that all market participants have the same opportunity to become aware of the price-sensitive fact, referred to as the "principle of equal treatment" (Art. 6 DAH). To make sure that all market participants have the same opportunity to become aware of a price-sensitive fact, ad hoc announcements must be sent to the addresses mentioned in Art. 7 DAH. Furthermore, ad hoc announcements must be uploaded on the issuer's website (Art. 9 DAH).
40. The issuer is responsible for the proper fulfilment of its obligations. An issuer must ensure simultaneous distribution of ad hoc announcements to all addresses (Art. 10 para. 2 DAH).
41. The election of a new member and vice-chairman of the BoD was highly important to X .. Person A. _ was not just any third party, but rather the founder and CEO of ☒ Company Y. _. Company Y ._ is (was) X. _ 's most important and exclusive [ ... ] collaboration partner in testing its lead drug candidate [Product Name] ([Product Name], [Product Name]) for the treatment of [ ... ]. From an ex-ante point of view, Person A. __ was a key person in X. _ 's BoD, and his election as the new vice-chairman was decisive for the future success of X. _. He would have had the ability to significantly influence the access to and the presence on the very important [ ... ] market for X. __ 's drug candidate [Product Name] ([Product Name], [Product Name]). X ._ ☒ ☒ explicitly stated this importance when announcing the election of Person A. _ by the AGM [Year] in its media release on [Date]. Hence, his election to X. _ 's BoD was of significant relevance for X. _ 's investors. This is further underlined by the fact that after the AGM [Year], certain investors asked the Company why Person A. __ was not listed in the issuer's documentation and not registered in the commercial register.
42. Accordingly, Person A. _ 's refusal to accept the election as vice-chairman and member of the BoD must be considered a price-sensitive fact. This is not disputed by X. _. X ._ 's BoD exchanged views on [Date AGM +115 Days] and decided that a ☒ communication to the market within the scope of the rules on ad hoc publicity was necessary. On the occasion of SER's investigation, X. _ confirmed that the election and Person A. _ 's refusal to accept the election were price-sensitive facts according to Art. 53 LR.
43. On [Date AGM], the AGM [Year] elected Person A. _ as vice-chairman and member of the BoD of X. _. The election alone does not constitute a legally valid appointment of the prospective BoD. The declaration of acceptance by the elected person is mandatory (MÜLLER Roland/Lipp Lorenz/Plüss Adrian, Der Verwaltungsrat - Band I, Ein Handbuch für Theorie und Praxis, 5. Aufl., Zürich - Basel - Genf 2021, S. 38).
44. X. _ states that after the AGM [Year] "Person A. _ , the founder and then CEO of X ._ 's ☒ [ ... ] counterparty Company Y. _ , had always been so unpredictable in his dealings with
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X. _ , the ongoing discussions with him to try to ultimately convince him of the acceptance of ☒
this election by X. _ 's shareholders, to arrange for the fulfilment of his conditions, and to address his compliance concerns raised have, in our view, clearly been worth trying for quite some time, even after his email of [Date AGM +47 Days]. In our experience, Person A. _ had said and written many things, and orally or in writing purported to agree to a number of obligations, but, unfortunately for X. _ , more often than not ended up doing or procuring something completely different than expected by us." In any case, Person A. _ firmly declared his refusal in writing via e-mail to X. _ on [Date AGM +47 Days] and requested that shareholders and SIX be informed accordingly within 24 hours.
45. The issuer must provide notification as soon as it becomes aware of the main points of the price-sensitive fact (Art. 53 para. 2 LR). The exception of Art. 54 LR (postponement of disclosure) does not apply in this case.
46. X. _ became aware of Person A. _ 's definitive (written) refusal to accept his election ☒ at the latest on [Date AGM +47 Days]. X. _ was therefore required to disclose the price- sensitive fact according to Art. 53 para. 2 LR by [Date AGM +47 Days] at the latest. The disclosure three and a half months later, on [Date AGM +154 Days], is not in compliance with Art. 53 para. 2 LR. X. _ 's attempts to change Person A. _ 's decision do not release it from its obligation of notification. Even on [Date AGM +47 Days], shareholders and the market had been left for several weeks with the wrong perception that Person A. _ would be part of X. _ 's BoD "and set the stage for successful clinical development" (as stated in the media release after the AGM).
47. X ._ 's argument that Person A. _ 's election as vice-chairman and member of the BoD ☒ was "on hold" until Person A. _ 's approval of the media release dated [Date AGM +154 Days] is not valid. To Sako, his argument is neither factually nor legally convincing because Person A. __ explicitly refused to accept the election.
48. X. _ failed to comply with Art. 53 LR and Art. 5 et seqq. DAH. ☒
49. The six incidents described above refer to price-sensitive facts. All incidents refer to activities relating to the core product [Product Name] ([Product Name], [Product Name]). Entering a new phase of a product's development, results of studies, reference to clinical trials or the announcement of progress in worldwide, commercial-scale development can trigger a significant change in market prices (Art. 53 para. 1 LR).
50. X. _ qualified the facts in the media releases dated [Date a +5 Days], [Date b +1 Day] ☒ and [Date c +1 Day] as price-sensitive facts and flagged the media releases dated [Date d +1 Day], [Date e +1 Day] and [Date f +3 Days] as ad hoc announcements pursuant to Art. 53 LR. This qualification is undisputed.
51. In each case mentioned, the ad hoc publication by X. _ took place at least one or several days later than the respective publication by Company Y. _ with the same content.
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52. Even if the price reaction is not decisive for the assessment of price sensitivity (see ex ante approach), it is noted that X. __ 's share price (incl. its trading volume) reacted very strongly in each of the aforementioned events.
53. X ._ 's and Company Y ._ 's cooperation regarding [Product Name] ([Product Name], ☒ ☒ [Product Name]) is governed by their Collaboration Agreement. Company Y. _ leads and has control over the [ ... ] clinical effort and commercialisation in its territory, and X. _ has control over commercialisation in its territory. Put simply, the parties agreed that inter alia, X. _ , owner of the rights to [Product Name] ([Product Name], [Product Name]), basically funds research and development, and would conduct development and provide documentation.
54. X. _ acknowledges that it is heavily dependent on Company Y. __ when it comes to the ☒ development of [Product Name] ([Product Name], [Product Name]). This dependency extends to all development-related information, as Company Y. _ is the only information holder. Due to the nature of the collaboration, any possible price-sensitive facts as defined in Art. 53 LR regarding [Product Name] ([Product Name], [Product Name]) established solely within the area of influence of Company Y. _ (e.g. clinical studies, study results, admission applications, granted or declined official admissions, etc.) directly affect X. _ and its share price.
55. SER considers that Company Y. _ is X. _ 's auxiliary in accordance with Art. 101 of the Swiss Code of Obligations (CO) when it comes to the development and related information regarding [Product Name] ([Product Name], [Product Name]). X. strongly objects to this qualification and alleges that "X. _ and Company Y ._ always were, and are, truly independent parties bound by a mutual important contract (that was disregarded by Company Y. _ ). Company Y. _ is a [ ... ]-listed separate entity entirely outside the X. _ group, and vice-versa. There were no personnel overlaps (as Person A. _ did finally withdraw his prior willingness to join the X. _ board) nor cross-participations or the like between these companies. Specifically, also when it comes to our SIX ad hoc publicity obligations, X. _ did not in any way agree or permit, but in contrast repeatedly expressly prohibited, Company Y. _ to act on behalf of, or without the express prior written consent of X ._ when distributing any media releases in the [ ... ] under their applicable securities laws and [ ... ] listing rules. As far as these SIX proceedings are concerned, Company Y. _ always issued their own press releases without our prior knowledge or agreement and not joint releases or ad hoc announcements pre-agreed by X. _. Company Y. _ is, and acted as, an independent third party (contractor) of X. _. " ☒ ☒
56. Sako concurs with the view of X. _ that Company Y. _ is not an auxiliary in accordance with Art. 101 of the Swiss Code of Obligations (CO). However, this does not discharge X. _ of its obligations to ensure conformity with the stock exchange rules, and notably the obligations concerning ad hoc publicity, as described hereinafter.
57. Issuers must take due account of the aims of transparency and equal opportunities for all market participants in their handling of information. It is the sole responsibility of the issuer to organise itself in such a way that it ensures compliance with all the provisions
of stock exchange regulations (Art. 53 LR, see Sako decision of 2 August 2019 [SaKo 2019-AHP-I/19], No. 44, for further details).
58. Generally, X. _ claims that its collaboration partner Company Y. _ repeatedly failed to comply with their Collaboration Agreement, which stipulated that neither of the parties would issue any press releases or public statements pertaining to [Product Name] ([Product Name], [Product Name]) or any related activities without the prior express written consent of the other party, except as required by applicable laws. X. _ is of the opinion that it has done everything in its power to enforce the Collaboration Agreement and to ensure Company Y. _ 's compliance with X. _ 's ad hoc publicity regulations. X ._ stated that it has always complied with its ad hoc publicity regulations.
59. Based on the facts of the case, it appears that the exchange of information relating to price-sensitive facts between X. _ and Company Y. _ has been hampered. Nevertheless, it was the duty of X. _ as an issuer at SIX to ensure that the Company was informed in advance of price-sensitive facts occurring within the sphere of influence of Company Y. _ in order to comply with the rules of ad hoc publicity or, at the very least, to ensure coordinated communication with Company Y. _. Since it appears that X. _ was not able to enforce the Collaboration Agreement with Company Y. _ , it should have taken all necessary measures to monitor the announcements made by Company Y. _ without prior coordination with X. _ and it should have been prepared to react immediately with a proper ad hoc disclosure under SIX regulations had Company Y. _ acted on its own. An issuer must take its own steps to ensure the necessary information is provided to market participants. For example, an issuer can (and must) publish its own ad hoc release as rapidly as possible if a contractor or another third party (pre)publishes the relevant information. It is undisputed that Art. 6 DAH has been violated, as market participants were not informed in accordance with Art. 7 et seqq. DAH. X. _ 's share price reacted very strongly to the aforementioned ad hoc announcements. In view of the applicable regulations and the principle of transparency and equal opportunities for all market participants, no constellation is conceivable in which an internal dispute may lead to the market not being notified of price-sensitive facts in a manner that is not in conformity with the rules, i.e. not in a manner that is appropriate in terms of time and content (DAH Guideline, No. 117, with further details on jurisprudence of the SIX judicial bodies).
60. On six occasions, X. _ disclosed price-sensitive facts one or several days after its contractual partner Company Y. __ had already made the same announcements in [Place]. The delayed publication by X. _ led to multiple situations where market participants were not informed equally and simultaneously regarding price-sensitive facts. Such behaviour violates the principal of equal treatment of all market participants (Art. 53 para. 3 LR in connection with Art. 6 DAH) and the obligation to disclose price- sensitive facts in a timely manner in accordance with Art. 53 LR.
61. Price-sensitive facts must be disclosed via ad hoc announcement in accordance with the DAH (Art. 53 para. 3 LR in connection with Art. 6 DAH). The notification by means of an ad hoc announcement is necessary to ensure that all market participants have the same opportunity to become aware of the price-sensitive fact, referred to as the "principle of equal treatment" (Art. 6 DAH). To make sure that all market participants have the same
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opportunity to become aware of a price-sensitive fact, ad hoc announcements must be distributed to all addresses according to Art. 7 et seqq. DAH. The issuer is responsible for the simultaneous distribution of ad hoc announcements to all addresses (Art. 10 para. 2 DAH).
62. It must be concluded that on six instances, X. _ published price-sensitive information in violation of Art. 7 et seqq. DAH. Such behaviour violates Art. 53 LR and, consequently, the principle of equal treatment of all market participants (Art. 53 para. 3 LR in connection with Art. 6 DAH).
63. As described in detail above, X. _ violated Art. 53 LR in combination with the DAH on several occasions.
64. Such violations are sanctioned in accordance with Art. 61 LR. The sanctions listed therein may be imposed cumulatively. Art. 61 para. 2 LR provides that in determining the sanction to be imposed, due consideration must be given to the severity of the breach and to the degree of fault. In cases where the issuer is to be sanctioned with a fine, the impact of the sanction on the party concerned must also be considered when setting the amount of the fine.
65. The LR requires issuers to ensure compliance with the LR, additional rules and related implementing decrees at all times. In this case, the sanction is addressed to a legal entity and requires that the issuer has not taken all necessary and reasonable organisational precautions to prevent a breach of the obligations under the LR. Accordingly, the fault is assessed based on largely objective standards. The conduct of the natural persons or bodies acting on behalf of the issuer are attributed to the latter (see Sako decision of 14 April 2015 [Sako 2015-AhP-I/15], No. 19, and of 30 July 2010 [SaKo 2010-CG-II/10/SaKo 2010-MP-I/10], No. 13; see also sanction notice of SER of 12 August 2013 [SER-KTR-FOR-I/13], No. 28, and of 4 February 2013 [SER-MT II/12/SER-AHP I/12/SER-Listing I/12], No. 103).
66. Whoever violates a relevant provision commits a conscious, intentional act. An issuer (through its officers) acts with conditional intent if they do not directly intend to violate an obligation, but nonetheless accept the likelihood of a violation.
67. X. _ does not support this view and claims that "X. _ acted negligently but not intentionally" (as far as the [non]-communication regarding Person A. _ 's refusal to be elected as a member of the BoD is concerned), and that "X. _ did not hide information or [seek] to mislead the market, at least not for such a long time. Similarly to the other events in question in these proceedings, X. _ once again had to deal with the unsolicited consequences of a counterparty behaving against what had been agreed."
68. X. _ 's position is not supported by SaKo's long-standing practice and case law (see Sako decision of 28 June 2012 [Sako 2012-AHP-II/11], No. 46; also see sanction notice of SER of 11 October 2013 [SER-AHP-I/13], No. 48, of 12 August 2013 [SER-KTR-FOR-I/13], No. 26, and of 4 February 2013 [SER-MT II/12/SER-AHP I/12/SER-Listing I/12], No. 101).
Furthermore, it must be noted that a higher degree of diligence can and must be expected in the field of self-regulation than in state-ruled criminal or administrative procedures, since self-regulation is based on the premise that participants wilfully submit to such regulations, whereas state-ruled regulations are imposed on the parties concerned. Therefore, participants in self-regulation are expected to be fully aware of any aspect of such regulations and to put in place an organisation that ensures full compliance therewith.
69. Listed companies are expected to be in full compliance with all stock exchange regulations. The responsible employees and officers must be familiar with the relevant regulations, including the applicable accounting standards, comments and practices of the stock exchange bodies (see Sako decision of 14 April 2015 [Sako 2015-AHP-I/15], No. 26, and of 13 August 2013 [Sako 2013-AHP-I/12], No. 37). Because of the issuer's duty of care, every issuer is expected to be familiar with the applicable stock exchange regulations, commentaries and practices of the judicial bodies. Any breach of the rules and regulations must raise a presumption of negligence on the part of the issuer in failing to discharge its duty of care (see sanction notice of SER of 11 October 2013 [SER- AHP-I/13], No. 49, and of 4 February 2013 [SER-MT II/12/SER-AHP I/12/SER-Listing I/12], No. 104; also see Sako decision of 2 August 2019 [Sako 2019-AHP-I/19], No. 53, for further details).
70. The elements in the file indicate that X. _ violated Art. 53 LR and Art. 5 et seqq. DAH consciously, and hence intentionally. Not only was X. _ aware - as documented by the exchange of e-mails that took place on [Date AGM +115 Days] - that the non-disclosure of Person A. _ 's refusal to accept his election on [Date AGM +47 Days] was "an issue" that "should have [been] announced to [ ... ] SIX and with a PR" under ad hoc publicity regulations, but X. _ also remained inactive for more than three and half months after it received the aforementioned refusal by e-mail. X. _ expressed the "hope" that "SER would not notice" its misconduct and tried to "hide" the information about the non- acceptance within its media release dated [Date AGM +154 Days], where it was presented as a mere side note. Consequently, given the above facts, it is evident that X. _ was aware of its violation, and instead of trying to remedy it immediately or at the latest when identifying the issue on [Date +115 Days], it consciously decided to further postpone the disclosure by more than a month and to "hide" the information in a media release scheduled to be published more than a month later.
71. Concerning the election of Person A. _ as vice-chairman of the BoD, the conduct must be qualified as intentional.
72. Regarding the six incidents set out above, there is no indication that X. _ acted intentionally. However, X. __ had not taken the adequate organisational measures to react promptly when its partner Company Y. _ repeatedly breached its contractual obligations by disclosing price-sensitive information in another time zone. At least after the first breach, X. _ should have reacted immediately in accordance with SIX regulations.
SIX
73. Concerning the reporting of price-sensitive facts, the conduct must be qualified as grossly negligent at least after the first incident.
74. The behaviour of the issuer after the violations does not give rise to any concerns. The Company participated constructively in the proceedings and responded to the questions raised in a timely manner.
75. There is an entry for X. _ in the sanctions register. On [Date], SER issued a sanction notice against X. _ in connection with a violation of regular reporting obligations and the LR. X. _ was sanctioned with a fine of CHF [ ... ]. The sanction notice became legally binding on [Date]. This entry must be considered in the assessment of the sanction (Art. 2.6 para. 4 RP).
76. The purpose of ad hoc publicity is to ensure that issuers provide the public with true, clear, and complete information on price-sensitive events arising during their business. Compliance with the rules on ad hoc publicity is essential for the functioning of a marketplace as it is designed to ensure equal treatment of market participants and transparency (DAH Guideline, No. 6 et seq .; Sako decision of 28 June 2012 [SaKo 2012- AHP-II/11], No. 56). Therefore, a violation of the rules on ad hoc publicity is, as a rule, considered to be severe (Sako decision of 2 August 2019 [Sako 2019-AHP-I/19], No. 61).
77. According to X. _ 's own statement, Person A. _ joining the BoD was an important element for the development of the Company. Therefore, failure to report the refusal of the election represents a serious violation of the ad hoc reporting obligations, even without considering the time frame. However, X. _ also waited at least three and a half months to inform the market about Person A. _ 's refusal to accept the election as a board member and vice-chairman of the BoD. Moreover, X. _ tried to "hide" this information within the ad hoc announcement of [Date AGM +154 Days]. This failure must be regarded as a very severe violation.
78. The Company violated the ad hoc publicity rules in a consistent pattern. The Company repeatedly failed to inform market participants equally over a period of several months. The publication of price-sensitive facts in violation of Art. 7 et seqq. DAH and the delayed publication of price-sensitive facts must be regarded as a severe violation.
79. Taking into account the severity of the breach and the degree of fault, SaKo considers a fine to be the appropriate sanction in accordance with Art. 61 LR.
80. When quantifying the sanction amount, the issuer's sensitivity to sanctions must be taken into account. In order to assess the sensitivity to sanctions, the economic performance of the issuer is considered. An issuer with a lower economic performance will tend to be hit harder by the same fine than a company with a comparatively higher
economic performance. For the determination of these fines, economic key figures can be taken into consideration, e.g. EBIT, net income, operating cash flow, cash and cash equivalents, or equity (see Sako decision of 28 June 2012 [Sako 2012-AHP-II/11], No. 63 et seq. and of 8 December 2011 [Sako 2011-AHP-I/11, SaKo 2011-CG-I/11], No. 37).
81. According to the Company's [Year] and [Year -1 Year] financial statements, X. _ 's ☒ EBITDA amounted to TCHF -[ ... ] in [Year] ([Year -1 Year]: TCHF -[ ... ]), and its operational result was TCHF -[ ... ] in [Year] ([Year -1 Year]: TCHF -[ ... ]). In [Year +1 Year], the loss amounted to TCHF [ ... ].
82. In view of the economic figures described above, the Company's sensitivity to sanctions is very high.
83. The Swiss Financial Market Supervisory Authority (FINMA) expects stock exchanges in Switzerland to enforce all applicable rules with strict measures. SaKo has already warned that it tends to raise the fines for breaches compared to the practice of earlier years, so prior levels of fines do not automatically set the standard for current practice. The purpose is not only to penalise the issuer for past breaches, but also to prevent breaches of the rules in the future. The sanction should in fact have a preventive effect [Sako 2016 - SER 29/15]: "[I]n recent years it has become clear that it is necessary to impose stronger sanctions for violations of the rules of the Exchange. The Sanctions Commission therefore is tending to raise the fines for breaches compared to the practice of earlier years ... The sanction should have a preventive effect." This policy was confirmed, for instance, in the Sako decisions 026/19, 051/21, 061/21, I/2022 (not yet entered into force) and II/2022, all of which saw SaKo taking steps to impose higher sanctions in respect of a preventive effect.
84. The limit for a sanction is CHF 10 million for intentional violations and CHF 1 million in cases of negligence. Sanctions can be combined in cases of multiple violations. In this case, two different violations are to be sanctioned, namely with regard to the election of Person A. __ to the BoD and the delayed publication of price-sensitive facts. The degree of fault as intention in the first violation and the severity of the breach in both cases lead to a sanction in a higher range, whereas the size of the X. _ and the Company's sensitivity to sanctions justify a lower amount.
85. Considering all the relevant factors for determining the sanction, Sako will sanction X. _ with a fine of CHF 125,000 for both violations, remaining at the lower end of the ☒ scale, mainly due to the size of the X. _ and the Company's sensitivity to sanctions.
86. According to Art. 6 para. 7 RP, the public will be informed of any investigation concluded by a legally binding sanction decision. In addition, the legally binding SaKo decision will be published on SER's website in anonymous form (Art. 6 para. 8 RP) and a media release, including the name of the Company, will inform the public of the closure of the case.
SIX
87. In case of sanctions proceedings, charges are determined based on the expenditure incurred, adopting an hourly rate of CHF [ ... ] per person according to Art. 3.7 in connection with Art. 4.1 of the List of Charges Regulatory Bodies (LocRB). In this case, the charges incurred by SER to date amount to CHF [ ... ]. Sako considers this amount to be at the lower end of the scale, taking into account the length and complexity of the proceedings.
88. The costs incurred by Sako amount to CHF [ ... ] and shall also be borne by X. _. ☒
89. Therefore, X. _ must cover total costs of CHF [ ... ]. ☒
Zurich, [Date]
Chairman of the Sanctions Commission:
Secretary of the Sanctions Commission:
[ ... ]
[ ... ]
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