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SWX Reprimands 2 Firms For Breaching Listing Rules

by Ulrika Lomas, for LawAndTax-News.com, Brussels

03 September 2007


The Swiss Exchange (SWX) has issued reprimands against two companies for breaches of the exchange's listing rules, and for violations of the Corporate Governance Directive.

On August 24, the SWX announced that it had determined that OC Oerlikon Corporation AG had violated the equal treatment obligation of the ad hoc publicity rules under Art. 72 of the Listing Rules.

According to the SWX, at investor meetings on 17 and 18 January 2006, the company made statements concerning its unpublished financial figures for the fourth quarter of 2005. The Executive Committee of the Admission Board of SWX therefore issued a reprimand against OC Oerlikon, and ordered that the sanction be published. The company lodged an appeal of this decision with the Disciplinary Commission of SWX, which in turn dismissed the appeal and affirmed the decision of the Executive Committee.

Pursuant to Art. 72 of the Listing Rules, SWX obligates the issuer to inform the market of any price-sensitive facts which have arisen in its sphere of activity and are not public knowledge. Price-sensitive facts are facts which are capable of triggering a significant price change. Disclosure must be carried out so as to ensure equal treatment of all market participants. Selective disclosure is a violation of the equal treatment obligation.

On 17 and 18 January 2006, the former CEO and the CFO of OC Oerlikon conducted investor meetings in London and Zurich, at which they made statements concerning, among other things, the company’s financial figures for the fourth quarter of 2005. That information was provided only to a limited circle of 25 analysts. At that point in time, however, all other market participants had yet to be informed about those financial figures. That did not occur until the company issued a media release on 10 February 2006. According to SWX practice, providing information on quarterly financial figures involves the disclosure of potentially price-sensitive facts. Through its selective disclosure, the company violated the equal treatment obligation laid down in Article 72 of the Listing Rules.

Then, in a statement issued on August 27, the SWX announced that UMS Schweizerische Metallwerke Holding AG, Dornach, (UMS) had provided false information in its 2005 Corporate Governance report with regard to the highest total compensation paid, as well as describing incompletely the tasks and areas of responsibility of the Audit Committee. In addition, it failed to disclose the minimum amount of information concerning the supervisory and control instruments pertaining to the external audit.

The Executive Committee of the Admission Board of SWX issued a reprimand with related publication against UMS. The company lodged an appeal of this decision with the Disciplinary Commission of SWX, which in turn dismissed the appeal and affirmed the decision of the Executive Committee.

According to the SWX, the 2005 Corporate Governance report of UMS was not drawn up in full compliance with the Listing Rules and the Corporate Governance Directive. Issuers are obligated to disclose separately the total compensation of the member of the board who received the highest total sum of overall compensations. In its 2005 corporate governance report, UMS indicated the amount of CHF 62,500 (EUR 38,000) as being the highest total compensation paid to a member of the board of directors. In actuality, the highest total compensation amounted to CHF 549,319.

Listed companies must disclose the composition of all board committees, as well as the tasks and areas of responsibility of those committees. The company’s 2005 Corporate Governance report indicated that the Audit Committee is a committee of the board of directors. As to the tasks and areas of responsibility of that committee, UMS stated merely that the Audit Committee works in close collaboration with the external auditors. However, as evidenced by its Audit Committee Rules, the company has a highly detailed and comprehensive set of rules that govern the tasks and areas of responsibility of the committee, a fact that was not disclosed in the company’s 2005 corporate governance report.

The company must disclose the supervisory and control instruments that the board of directors has at its disposal to assess the external audit. Included in that requirement is at least the disclosure of information on how the external auditors report to the board of directors, or on the number of meetings of the audit committee in which representatives of the external auditors participated. Accordingly, as a minimum requirement, UMS should have disclosed how the external auditors report to the board of directors, as well as the fact that the Audit Committee held six meetings with the external auditors. The information associated with these minimum requirements must be clearly and explicitly presented in the Corporate Governance report.

The SWX said that periodic reporting in compliance with applicable Directives forms an integral part of the information that contributes to a properly functioning market in accordance with the provisions of the Stock Exchange Act and the Listing Rules. One of the tasks of SWX is to enforce the transparency provisions that apply to issuers.


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