Financial reporting procedural flow chart
Overview of the various phases (Selection / Review, Preliminary investigation / Investigation and Agreement / Sanction).
Selection / Review
Selection of the annual and semi-annual financial statements for review is made by SIX Exchange Regulation on the basis of a risk-oriented appraisal, whereby particular weight is placed on the following aspects as they pertain to the given issuer:
- New listing, or first-time application of an accounting standard
- Significant change in business activities / company structure
- Change in corporate management (CEO / CFO)
- Qualification in auditor's report
In addition, a certain number of financial statements will be selected in such a way that the financial reporting of a specific issuer is subjected to a review by SIX Exchange Regulation in general at least every five to eight years.
The annual or semi-annual financial statements of a selected issuer will be reviewed with a risk-oriented procedure to verify compliance with the chosen accounting standard. The review focuses in particular on the following circumstances of financial reporting:
- Standards which, owing to the company-specific configuration or particular situation, are deemed to be especially critical
- Standards which have been defined in advance as areas of focus
- Standards where experience has shown to be particularly prone to errors (refer to Financial Reporting Circular 2)
- Standards which have been applied / were applicable for the first time
Preliminary investigation / Investigation
No preliminary investigation / Direct Comment Letter
If a risk-oriented review of the financial statements determines no justifiable cause for the initiation of a preliminary investigation on the part of SIX Exchange Regulation, the issuer will be notified of that fact by means of a "Direct Comment Letter". The "Direct Comment Letter" may also include recommendations on how the quality of the financial reports can be improved.
A preliminary investigation will be initiated if there are indications of possible violations of the applicable financial reporting requirements. Preliminary investigations are conducted in writing by SIX Exchange Regulation and involve questions on the part of the responsible financial reporting specialists that must be answered by an established deadline (Art. 2.4 Rules of Procedure). Upon justified request, a one-time extension of this deadline may be granted.
If there is suspicion of a violation of the applicable financial reporting requirements that justifies a sanction, SIX Exchange Regulation will initiate an investigation. The initiation of an investigation is communicated only after a sanction decision is sent to the issuer or after a sanction request is sent to the Sanctions Commission.
The findings of a preliminary investigation or an investigation, provided they do not pertain to violations that justify a sanction, will be communicated to the issuer in writing by means of a "Comment Letter". In this letter, SIX Exchange Regulation will differentiate between recommended and expected changes in the issuer's future financial reports. In addition, the findings contained in the "Comment Letters" will be summarized and published in an annually revised Financial Reporting Circular.
Agreement / Sanction
Under the Rules of Procedure, SIX Exchange Regulation has the authority to conclude sanction proceedings by means of an agreement. Agreements are permissible if, among other things, they would allow the public to be informed more rapidly or more fully than would be the case with sanction proceedings concluded in the regular manner. If an issuer has already been sanctioned within the past three years, or if a severe breach is involved, an agreement is not possible. All agreements must be published.
Sanction decision / decision
If an agreement is not possible, SIX Exchange Regulation may issue a reprimand or a fine by means of a sanction decision. The sanction decision will be published once it becomes legally enforceable.
If, in the case of a breach of the financial reporting requirements that justifies a sanction, an agreement or sanction decision is not possible, SIX Exchange Regulation will lodge a sanction request with the Sanctions Commission. In order to protect the issuer's right to a legal hearing, this request will be forwarded to the issuer together with a deadline for the submission of a statement on its position. Any such statement by the issuer will be attached to the sanction request and presented without further comment to the independent Sanctions Commission for adjudication. The Sanctions Commission has a comprehensive range of sanction measures at its disposal. All legally enforceable decisions must be published.
Proceedings related to financial reporting are communicated to the public pursuant to Art. 4 RLR only after a sanction decision is sent to the issuer or after a sanction request is submitted to the Sanctions Commission.
Every agreement and all legally enforceable decisions are published by SIX Exchange Regulation in condensed form by means of a media release. As part of this, the release is actively disseminated as well as posted for a three-year period under Media Releases on the SIX Exchange Regulation website. In addition, the full version of rulings and sanction decisions will be published in anonymized form on the SIX Exchange Regulation website.
Directive Financial Reporting
Directive on Financial Reporting
Circular No. 2
Circular No. 2 - Financial Reporting
Rules of Procedure
Rules of Procedure
SIX Exchange Regulation Communiqué No. 1/2018
Areas of focus for the review of 2018 annual and interim financial statements