Facts

{ "title": \"Licensable proprietary trading as securities dealer and liquidation of the company as well as cease-and-desist order and its publication against the sole shareholder", \"facts": \"

Parties and subject matter of the proceedings:

  • The appellants are the [B. AG] (a public limited company) and its sole shareholder and sole signatory body [A.] .
  • The Swiss Financial Market Supervisory Authority (FINMASA) initiated enforcement proceedings against both of them (cf. Art. 53 FINMASA).
  • The subject matter of the present judgment is whether the activities of the appellants were subject to licensing and whether the measures ordered by FINMASA against the appellants violate federal law (B-687/2016).

FINMASA ruling of 17 December 2015 (submission procedure):

  • FINMASA concluded that [B. AG] had engaged in proprietary trading as a securities dealer (proprietary trader) without a licence and had thereby seriously violated supervisory provisions (Art. 10 in conjunction with Art. 2 lit. d SESTA).
  • It refused to grant [B. AG] a securities dealer licence retroactively and ordered its liquidation (Art. 37 FINMASA).
  • With regard to [A.] , FINMASA decided that he had, due to his significant contribution to the unauthorised activity, engaged in proprietary trading without a licence and had thereby also seriously violated supervisory provisions.
  • [A.] was ordered, under threat of penalty, to refrain from any activity subject to licensing under financial market law, whether directly or through third parties, and from any advertising in this regard; in particular, he was instructed not to engage in proprietary trading as a securities dealer or to advertise such activity.
  • FINMASA would publish the cease-and-desist order against [A.] on its website for a period of 3 years once the ruling had become final (Art. 34 FINMASA).
  • The costs of the investigating officers (CHF 474,958.30) were allocated as follows: CHF 379,966.65 to [B. AG] and CHF 94,991.65 jointly and severally to [B. AG] and [A.] . The procedural costs (CHF 80,000) were allocated as follows: CHF 64,000 to [B. AG] and CHF 16,000 jointly and severally to [B. AG] and [A.] .

FINMASA ruling of 20 June 2017 (market manipulation):

  • Due to its conduct (systematic market manipulation such as "spoofing", \"layering" and \"ramping"), [B. AG] was classified as a proprietary trader exceeding the defined threshold (Art. 2 para. 1 lit. d SESTA in conjunction with Art. 19 et seq. SESTO) of more than CHF 5,000,000,000 (gross) per year and had seriously violated the corresponding supervisory provisions.
  • FINMASA confiscated the proceeds from the liquidation proceedings of [B. AG] in favour of the Swiss Confederation (Art. 35 FINMASA) and imposed procedural costs of CHF 40,000 on it.
  • SIX Swiss Exchange had examined the trading behaviour of [B. AG] for the period from 3 December 2012 to 5 August 2013 and submitted an investigation report to FINMASA containing \"reasoned" indications of abusive market conduct.

FINMASA ruling of 20 June 2017 (market manipulation by [A.] ):

  • In connection with investigations at [C. AG] and [B. AG] , [A.] 's conduct was also examined for any possible market manipulation.
  • FINMASA found that [A.] had also manipulated the market over several years and had seriously violated the relevant stock exchange provisions (Art. 15 et seq. SESTA).
  • Due to the duration and systematic nature of the conduct, the supervisory law violations found were deemed to be serious.
  • FINMASA ordered the following measures against [A.] :
    • a ban on proprietary trading activities for a period of 8 years from the date the ruling became final (Art. 33 FINMASA);
    • a ban on holding a management position with a financial intermediary supervised by FINMASA for a period of 5 years from the date the ruling became final (Art. 33 FINMASA);
    • confiscation of an amount of CHF 201,500 in favour of the Swiss Confederation (Art. 35 FINMASA);
    • confiscation of any dividends awarded in the course of the liquidation proceedings of [B. AG] (Art. 35 FINMASA);
    • imposition of procedural costs of CHF 40,000 on [A.] (points 1, 2, 4, 5, 6 of the ruling).

Proceedings before the Federal Administrative Court:

  • [B. AG] and [A.] appealed against the FINMASA rulings of 17 December 2015 and 20 June 2017 to the Federal Administrative Court.
  • The Federal Administrative Court held a joint public hearing in the three proceedings on 21 May 2019.
  • On 27 February 2020, the Federal Administrative Court dismissed the various appeals in essence. It only upheld the appeal of [B. AG] regarding market manipulation to the extent that FINMASA had also included the share capital of CHF 100,000 contributed by the founder of [B. AG] in the distributable profit subject to confiscation. The confiscation of the entire liquidation proceeds ordered in the contested ruling was to be corrected accordingly.
  • The Federal Administrative Court confirmed that [B. AG] and [A.] had unlawfully influenced and manipulated the market by entering numerous trading orders and immediately cancelling at least 89% (or according to FINMASA's calculations 99%) of the orders.
  • There was no permissible \"market making" or \"hedging".

Appeal to the Federal Supreme Court:

  • On 24 April 2020, [B. AG] and [A.] filed a single appeal against the three rulings of the Federal Administrative Court of 27 February 2020.
  • In their main prayer, they requested that the Federal Supreme Court set aside the judgments of the Federal Administrative Court; the Federal Supreme Court should decide the matter itself and hold an oral hearing pursuant to Art. 6 ECHR.
  • In their alternative prayers, they requested that the Federal Supreme Court set aside the judgments of the Federal Administrative Court and refer the matter back to the Federal Administrative Court. The latter was to be instructed to reassess the facts and the application of the law with full cognition and taking full account of the constitutional procedural guarantees under the ECHR (nemo tenetur, presumption of innocence, right to information, effective defence, defence rights, right to question witnesses and right to confrontation) and the considerations of the Federal Supreme Court in this appeal. In addition, numerous applications for taking evidence (hearing of numerous witnesses, etc.) were submitted.
  • FINMASA requested that the appeal of 24 April 2020 be dismissed insofar as it was admissible. It also requested that no interim measures be granted, including the granting of suspensive effect.

Federal Supreme Court ruling of 7 October 2020:

  • The Federal Supreme Court dismissed the request to join the proceedings, as the various issues had to be dealt with separately.
  • It did not address the appellants' criticism of the FINMASA ruling, as this had been superseded by the contested judgment of the Federal Administrative Court.
  • The Federal Supreme Court examined the appeal taking into account the general duty to state reasons and to substantiate claims (Art. 42 para. 1 and 2 FSCA) and concluded that the appellants had not sufficiently and substantively demonstrated a violation of fundamental rights.
  • The Federal Supreme Court confirmed that the measures ordered by FINMASA (liquidation of the company, cease-and-desist order and its publication against the sole shareholder) did not violate federal law and were proportionate.
", \"reasoning": \"

Classification of supervisory measures as administrative sanctions:

The Federal Supreme Court confirmed the case law according to which the publication of a cease-and-desist order and an advertising ban pursuant to Art. 34 FINMASA as well as the liquidation of a company pursuant to Art. 37 FINMASA do not constitute criminal measures within the meaning of Art. 6 ECHR. These are repressive administrative sanctions and preventive measures for the protection of the public and the proper functioning of the financial markets. The addressees of these measures are persons who are in a special licensing, recognition or admission relationship and are required to comply with certain supervisory obligations for the protection of market participants. The publication does not depend on individual fault in the sense of criminal law, but on an individually attributable serious violation of supervisory obligations. The focus is on creating transparency as an essential element for the proper functioning of the financial markets (E. 4.1.1-4.1.3).

Proportionality of the ordered measures:

The Federal Supreme Court examined whether the measures ordered by FINMASA (liquidation of the company, activity and professional bans and their publication against the sole shareholder) were proportionate. It confirmed that the licensing requirement for proprietary traders pursuant to Art. 10 in conjunction with Art. 2 lit. d SESTA as well as the calculation of the turnover threshold of CHF 5,000,000,000 (gross) per year pursuant to Art. 19 et seq. SESTO comply with the principle of legality and the requirement of clarity. FINMASA may, on the basis of these provisions, provide for a general licensing requirement if the corresponding activities could jeopardise the proper state of the financial market. The minimum turnover threshold cannot relate to the turnover of individual traders, but must relate to the company as such; otherwise, the minimum volume could be arbitrarily increased and the intended functional protection circumvented (E. 7.1.1-7.2.2).

Legal nature of supervisory liquidation and sanctions:

The Federal Supreme Court confirmed that the liquidation of a company pursuant to Art. 37 FINMASA as well as the confiscation of proceeds and procedural costs pursuant to Art. 35 FINMASA do not constitute criminal sanctions. These are administrative measures determined on the basis of the polluter pays principle, irrespective of fault. The costs of the investigating officers and the procedural costs are high, but still reasonable in view of the conduct of the appellants in the various proceedings, as they had caused corresponding (additional) effort with their numerous – partly unnecessary – submissions and applications (E. 8.1-8.3.2).

Violation of procedural guarantees and right to a speedy trial:

The Federal Supreme Court examined whether the appellants' procedural rights had been violated (presumption of innocence, right against self-incrimination, prohibition of using illegally obtained evidence, etc.). It confirmed that the FINMASA sanctions are not of a criminal nature and that the corresponding federal (Art. 29 and Art. 30 Cst.) and international procedural guarantees (Art. 6 para. 1 ECHR) do not apply in enforcement proceedings. FINMASA and the Federal Administrative Court addressed the relevant submissions in their decisions and provided sufficient reasons. The appellants were able to challenge the judgment of the Federal Administrative Court appropriately. The duration of the proceedings before FINMASA and the Federal Administrative Court was reasonable given the complexity of the case.…