Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4

Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8

Market selection

Recommendation 4

Each market must have clear rules assuring investor protection by safeguarding participants from the financial risks of failed settlement and ensuring that listed companies are required to follow sound policies on corporate governance, transfer of economic benefits and shareholder rights.

1.	Does the depository or the market have securities lending and borrowing schemes in place, and are these open to all market participants and their settlement agents?	SIS offers participation in a borrowing and lending program. The customers can decide if they prefer automatic borrowing for fail coverage or "on demand" borrowing. In both cases, SIS legally acts as principal to the transaction and all transactions have to be fully collateralised. In order to participate, the proper agreements/contracts have to be signed and credit lines must be in place. Alternatively there is a very active borrowing and lending business among the market players.
2.	Does the settlement system mark fail trades to market and collect margin from the failing counterparty to protect the innocent counterpart's interest?	SIS does not mark fails to market. Due to the high rate of STP in the Swiss market (interconnection of trading and settlement platforms with the National Bank's cash clearing system), the fail-rate is typically very low (below 1% for exchange trades and around 6% for OTC transactions). The counterparty risk for the investor is eliminated through application of simultaneous, final and irrevocable DvP (SFIDVP).
3.	Does the market operate a guarantee fund or have an equivalent procedure to protect against the cost of failed transactions; and which sectors of the market does it cover?	There is no guarantee fund operated by SIS, however, exchange participants have to deposit CHF 500'000 collateral in cash or securities. This deposit covers monetary damages arising from non-fulfilment or only partial fulfilment of obligations associated with securities transactions between SWX participants, and also serves as a guarantee for any fines imposed by SWX. The "Provisions Governing Collateral Deposits" (General Conditions) describe the benefits and the claims that can be made against the collateral, and also explain the procedure in the event of non-performance by SWX participants due to payment difficulties.
4.	Are the stock transfer agents (share registrars) linked electronically to the depository?	It is not compulsory for the share registrars to connect electronically to SIS, however a vast majority of registrars in Switzerland use the functionality offered by SIS. Companies also have the option to outsource their share register operations to SAG, an affiliated company of SIS under the FSG holding.
5.	Is there a legal maximum time period to complete ownership transfers in the books of the issuer? If so, does market practice adhere to the deadline?	De-registration takes place immediately after a sale. There is no legal maximum time period to complete re-registration in Switzerland. Registered stocks can be sold at any time regardless of the registration status. When purchasing exchange listed registered shares through an exchange transaction, the buyer in principle acquires full ownership rights on trade date. However, the company can suspend the voting right by formally refusing to recognise the new shareholder within a period of 20 calendar days after receipt of the ownership transfer request. Valid reasons for refusal are very limited and are explicitly stated in the law. The 1992 revision of Swiss Corporation Law created a special status "shareholder without voting rights" to cover this situation. (Code of Obligations, Article 685). Monetary rights such as dividends and exercising pre-emptive rights, cannot be withheld. Slightly different, less restrictive legal provisions apply to unlisted registered shares whose issuers are typically small businesses. The lawmaker provided them with more leeway for fending off undesired shareholders.
6.	Are investors entitled to all benefits arising on a security from the point of purchase; and how are any rules enforced?	Under the rules of the Swiss Stock Exchange (SWX) an investor is entitled to all benefits and rights from the point of execution of a trade. For the compensation of benefits from corporate actions SIS uses an automated system.
7.	Is proxy voting permissible in the market and can such proxies be lodged by post or other remote delivery method?	Proxy voting is permitted in the Swiss market and the proxies are lodged by post.
8.	Are there binding rules in the market stating the minimum and maximum lapsed time between the announcement and completion of key events, including registration, the calling of shareholder meetings, the payment of dividends or interest, rights issues, tender offers and other voluntary corporate actions?	The main rules are covered by the Swiss Code of Obligations. Notice of at least 20 days is required to call a shareholder meeting. Dividends are normally declared payable immediately after the shareholder meeting. There are rules for tender offers in the Swiss Stock Exchange Law and in the SIS operating rules.
9.	Are all voluntary corporate actions advised through a central mechanism assuring consistent information to all investors?	Information on all corporate actions (on securities held with SIS) is distributed electronically by SIS to the account holders in two stages. First there is a pre-advice based on information received from Telekurs (the main securities data distributor in Switzerland) or custodians (for foreign securities) followed by a final notification after the information has been verified by the principal paying agent. The banks notify the end investors through their established communication channels. Background information can be distributed in various forms (paper or electronic) and is available from various sources.
10.	Is information on corporate actions available electronically, and is the minimum lapsed time for responding to such actions sufficient to enable all domestic and foreign investors to respond in a timely and considered fashion?	Information on corporate actions is available electronically from information providers and data distribution companies, such as Telekurs, as well as from custodians and principal paying agents. SIS handles all corporate actions for its participants (domestic and foreign). If a corporate action requires an investor decision, SIS makes sure the information is received in time by the account holder and sets a deadline for response (dependent on the market). SIS does not act on standing instructions in such cases, but follows up with the client until an instruction is received.