The SWX Swiss Exchange (SWX) has issued a fine against Eastern Property Holdings Limited, Tortola, British Virgin Islands, in the amount of CHF 15’000 together with publication of that fact as a result of the company’s violation of provisions of the Listing Rules. The decision by the Disciplinary Commission of the SWX relates to the non-observance of reporting deadlines for the disclosure of management transactions in accordance with Art. 74a of the Listing Rules.
Pursuant to Art. 74a of the Listing Rules (LR), transactions concluded by members of the board of directors and senior management of an issuer (liable individuals) must be reported to the SWX within two trading days following receipt of the relevant notification, provided the total transaction value exceeds a threshold amount of CHF 100’000 per calendar month per liable individual. Subsequently, those reports are published on the Website of the SWX at www.swx.com/admission/being_public/mtrans/publication_en.html.
As a part of this procedure, the issuer’s liable individuals (members of the board of directors and senior management) must disclose their transactions to the issuer at latest on the second trading day following execution of the transaction. Hence in total, a maximum of four trading days may pass between the trade date and the submission of the related information to SWX.
The purpose of the disclosure of management transactions is to provide market participants as rapidly as possible with information on transactions executed by the management of listed companies.
In the case at hand, a member of the issuer’s senior management / executive member of the board of directors purchased on 8 March 2006 a total of 444 registered shares of Eastern Property Holdings Limited for a total price of CHF 59’136. On the following day, the same individual purchased an additional 500 registered shares for a total price of CHF 66’594. Both transactions were reported to the issuer within the two-day reporting deadline prescribed under Art. 74a para. 1 LR. Because the collective value of these transactions exceeded the threshold amount of CHF 100’000 per liable individual per calendar month, the transactions should have been reported within two trading days via the Web-based reporting platform of the SWX in compliance with Art. 74a para. 3 LR. That however only took place on 29 June 2006.
On 26 May 2005, a member of the issuer’s senior management / executive member of the board of directors purchased 1’000 registered shares of Eastern Property Holdings Limited for a total price of CHF 128’210, and the transaction was also reported to the issuer within the prescribed deadline. However that transaction, too, was not reported by Eastern Property Holdings Ltd. until 29 June 2006.
The reason for these delayed disclosures by Eastern Property Holdings Limited lies in the fact that the company, following the entry into force of Art. 74a LR on 1 July 2005, failed to regulate the internal responsibilities for reporting management transactions and did not arrange for access to the web-based reporting platform of SWX. This in essence presents no problem, provided the company’s liable individuals effect no reportable transactions. But if those individuals do in fact enter into such transactions and report them to the company, that organisational shortcoming almost inevitably leads to a delay in the disclosure of the transactions.
In the previous instances where a reprimand with related publication has been pronounced in the area of management transactions, issuers had in principle adopted reasonable organisational steps for the reporting and disclosure of management transactions. Violations mainly arose from the way reports were handled and supervised in the specific cases.
Eastern Property Holdings Limited, however, had not installed any reporting mechanisms at all for the disclosure of management transactions, which in its concrete case made it impossible for the company to comply with the obligation to disclose management transactions in a timely manner. Consequently, the company violated Art. 74a LR. The Disciplinary Commission deems this breach of the Listing Rules to be considerably more severe as compared to other cases involving sanctions in the area of management transactions, and therefore considers a fine of CHF 15’000 to be a reasonable sanction under the given circumstances.
Information on the provisions governing the disclosure of management transactions can be accessed at: www.swx.com/admission/being_public/management_transactions_de.html
