Swiss Private Bank Reprimanded By Regulator For Manipulating Its Share Price

Max Skjönsberg

26 April 2012

The Swiss regulator has reprimanded Valiant, the private bank and holding firm, for manipulating its share price in 2010.

Valiant propped up the price of its own shares against the general market trend and kept it artificially high before a sharp fall in October 2010, the Swiss Financial Market Supervisory Authority said in a statement.

“We have set out organisational measures that Valiant need to implement to prevent this from happening again, a process the bank has already started,” a spokesperson for the FINMA told WealthBriefing. “We will make sure that they will be carried out within a certain timeframe, but we have to give them some time, say a few semesters (six-month periods).”

"The FINMA wanted us to carry out two main measures,” a spokesperson for Valiant told this publication. “These two demanded measures have already been initiated by Valiant at the end of 2010 and the FINMA acknowledges this.”

The regulator has not imposed any financial penalties on Valiant and has neither the authority nor the instruments to fine financial institutions.

From August 2010 onwards, the bank’s shares came under increasing selling pressure and the FINMA concluded that Valiant absorbed this pressure by strategically purchasing substantial quantities of its own shares and adding them to its own holdings. “The volume of purchases was geared to the price at the time, and was designed to prevent a further fall in the market price which would have triggered additional sales,” the FINMA said.

“As a result of the share purchases by Valiant, the share price bucked the general market trend until mid-October 2010 and declined only slightly, indicating that it was being artificially propped up,” the regulator said.

The selling pressure constantly increased until Valiant was no longer able to absorb it by purchasing shares and it resulted in the share price falling 22 per cent between 18 and 21 October 2010.

The FINMA said that Valiant “seriously violated its duty to ensure proper business conduct and its organisational requirements when conducting its proprietary trading”. It was recognised, however, that Valiant took measures to remedy the organisational shortcomings that had been identified during the proceedings which started early last year.