The draft changes proposed in the consultation on the amendment to the Financial Market Infrastructure Act seek to introduce wide-ranging information duties towards the Disclosure Office or FINMA. The nemo tenetur principle and other basic principles of the rule of law, however, warrant specific limits.
By Benjamin Leisinger / Reto Ferrari-Visca (Reference: CapLaw-2024-84)
The draft legislation proposed by the Swiss Federal Council to amend the Financial Market Infrastructure Act (FMIA) includes several provisions, i.e., articles 39(7), 124b, 145 and 146 of the draft FMIA, that seek to introduce wide-ranging information duties towards the relevant Disclosure Office or the Swiss Financial Market Supervisory Authority FINMA (FINMA), respectively.
Article 39(7) of the draft revised FMIA would introduce a general duty for all participants admitted to a trading venue to provide FINMA with all the information and documents it requires to perform its duties. While this duty already applies – via article 29 of the Federal Act on the Swiss Financial Market Supervisory Authority (FINMASA) – to Swiss supervised entities, as the Explanatory Report on the Opening of the Consultation Procedure (Explanatory Report) correctly states, the new duty would apply to all participants of trading venues, irrespective of whether they are subject to supervision by FINMA.
Article 124b of the draft would introduce an explicit duty for individuals and companies subject to the disclosure and reporting obligations under the FMIA to provide the necessary information and documents to the relevant Disclosure Office. According to the Explanatory Report, such a right to information on the part of the Disclosure Offices is necessary so that they can actually assess whether a breach of the reporting obligation has occurred and thus be able to comply with their supervisory obligations regarding the correct fulfillment of the reporting obligation in accordance with article 124a. The Disclosure Offices are not required to conduct any actual investigations beyond the collection and evaluation of information as such investigations are reserved for FINMA as the competent supervisory authority. In other words, the Disclosure Offices only require the information and documents that are necessary to ensure that all disclosure obligations are fulfilled and that transparency within the financial market is maintained.
Similarly, the new draft article 145 FMIA states that, amongst others, the supervisory instruments in accordance with article 29(1) FINMASA apply to all persons who violate certain articles of the revised FMIA (including the disclosure obligation in article 120 FMIA). Article 29 FINMASA is the legal basis for the duty to provide FINMA with all information and documents that it requires to carry out its tasks.
Furthermore, article 146 of the draft legislation intends to introduce an information duty. According to the draft legislation, the admission, disclosure and monitoring bodies of the trading venues and DLT trading systems as well as issuers and their agents would have to provide FINMA all information and documents that it requires to fulfill its duties.
All of the proposed statutory rules to provide information have a common and significant defect: they can come into conflict with the fundamental principle that no one is obliged to incriminate themselves (so-called prohibition of self-incrimination or nemo tenetur se ipsum accusare principle). While wide-ranging information duties towards the Disclosure Offices and FINMA may arguably be in the public interest, in particular to ensure the proper functioning and transparency of the financial markets, and thus in general justified, they cannot override the nemo tenetur se ipsum accusare principle. This principle is guaranteed by both article 32 of the Federal Constitution of the Swiss Confederation and by international law (specifically, by article 6 of the European Convention on Human Rights and article 14(3)g of the International Covenant on Civil and Political Rights) and applies to individuals and legal entities alike. Therefore, in the authors’ view, this conflict must be resolved by establishing an explicit statutory right of refusal, particularly given that the new information obligations are to apply to all participants of trading venues and/or to issuers and their agents. Relevant existing procedural regulations, for example, do provide for corresponding explicit rights of refusal (e.g. article 42 Federal Act on Federal Civil Procedure; article 16 Federal Act on Administrative Procedure; article 169 Swiss Criminal Procedure Code; article 163 Swiss Civil Procedure Code). The right of refusal must also extend to the case of possible danger to close persons. In this context, such persons must include, in particular, persons for whom the person or company obliged to provide information or a group company has a duty of care (such as employees and members of the board of directors). It is essential that the final draft of the legislation provides clarity on this matter to avoid any ambiguity or uncertainty. In line with fundamental legal principles on the rule of law, the final legislation should also clearly state that matters and documents that are subject to attorney-client privilege are not covered by the duty to provide information, also not where attorneys act as an agent of an issuer.
At the very least, a rule should be introduced that any information provided to the Disclosure Office or FINMA, as applicable, cannot be used in related proceedings that could lead to criminal or administrative sanctions. The European Court of Human Rights, for example, has on various occasions qualified the use of information obtained in administrative proceedings on the basis of a duty to provide information as inadmissible in criminal proceedings and thus ultimately established a ban on the use of such evidence.
The legislator should take note of the existing critical views voiced in connection with article 29 FINMASA and should carefully consider whether the same obligations should be introduced for all market participants in connection with regulations on market abuse and/or the notification of significant shareholdings.
Benjamin Leisinger (benjamin.leisinger@homburger.ch)
Reto Ferrari-Visca (reto.ferrari-visca@homburger.ch)