Swiss regulator raids Deutsche Bank, ZKB offices

Swiss bank regulators on Thursday confirmed raiding the offices of three companies, including Deutsche Bank, in mounting investigations about possible breaches in share disclosure rules.

The Federal Banking Commission said the Zurich offices of the German bank was under investigation, along with Zürcher Kantonalbank (ZKB), the big public sector bank, and Neue Zürcher Bank, an equity boutique.

The raids took place in connection with continuing investigations into share purchases in Sulzer, the Swiss engineering group, made by the jointly owned investment vehicle of two Austrian raiders and a Russian oligarch.

Last month, Everest, the investment company, shocked the market with the revelation that it had amassed a 32 per cent stake in Sulzer via shares and options. Swiss law requires regular disclosure at various thresholds, all but one of which had apparently been breached

The covert stake building, practised by the Austrian in at least two previous cases, was possible because of loopholes in disclosure law. Buyers of so-called cash settled options do not have to reveal stakes. Following the recent cases, the law is being amended urgently to lower the first disclosure hurdle from 5 per cent to 3 per cent and include cash settlement options.

The investigations are believed to involve both the banks’ use of options and suspicions they may have acted in concert – forbidden under Swiss law.

All three banks, which have been highly active in options trading for companies in play, said they were co-operating with the inquiries. .

ZKB last month dismissed its head of investment and private banking in an initial reaction to criticisms of its activities. That was followed by this month’s early retirement of the bank’s chief executive, and the dismissal of its head of trading and capital markets.

ZKB has been most exposed, because of its public sector status and the fact that it was also Sulzer’s prime relationship bank. In spite of widespread market speculation that the company was a takeover target and the bank was involved, top ZKB executives gave Sulzer assurances that it was neutral, apparently unaware of their traders’ activities.

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