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Nordic Market Newsletter

15 March 2011

Sweden

Legislation

Financial crisis committee
On 3 February 2011, the Swedish government appointed a committee to examine the Swedish legal framework regarding actions in cases of financial crises. The objective of the committee is to propose measures aiming at improving the legal framework.

Amendments to the capital adequacy rules
On 15 February 2011, the Swedish government proposed changed capital adequacy rules mainly concerning rules about large exposures, securities and cooperation between authorities in critical situations. The amendments aim at stabilizing the financial market and to create better protection towards new crises. The proposal is a part of the implementation of the two EU directives CRD II and CRD III. The major part of the new rules is proposed to come into force on 30 July 2011, as for the rest on 31 December 2011.

Foreign Branch Offices Act
The Swedish government proposed certain amendments to the Foreign Branch Offices Act (1992:160), which have been submitted to the Council of Legislation for comments and review. The purpose of the proposed amendments is to clarify that the provisions harmonize with EU law. Proposed changes include that economic activity covered by the EU's common rules on free movement of goods and services is not covered by the Act's requirements for establishment through a branch, that the requirement that the foreign company's name and nationality should be included in the company name of the branch is taken away, and that the requirement for the company to authorize a person who is resident in Sweden to accept service of process on behalf of the foreign company only is applicable when the managing director of the branch is resident outside the EEA. The amendments are proposed to come into force on 1 July 2011.

Settlement and Financial Collateral Arrangements
The Swedish government proposed legislative amendments for the implementation of Directive 2009/44/EG (the “Amending Directive”) which amend Directive 98/26/EC on settlement finality in payment and securities settlement systems (the “SFD”) and Directive 2002/47/EC on financial collateral arrangements (the “FCD”), regarding linked systems and credit claims. The government submitted this proposal to the Council of Legislation for comments and review. The purpose of the Amending Directive is to align the SFD and the FCD to the developments which have taken place on the market and within the European regulatory framework. The proposal also includes other amendments than those directly motivated by the Amending Directive, which aims to improve the current regulatory framework on the basis of views expressed by some submittees. The amendments are proposed to come into force on 30 June 2011.

Swedish Financial Supervisory Authority

New rules for bonuses
The Swedish Financial Supervisory Authority (the “SFSA”) has presented its new proposed rules following the implementation of directive CRD III regarding remuneration systems in credit institutions, investment firms and fund management companies in their final version. These rules will be effective as of 1 March 2011. The proposed amendments, which were commented in hte previous Nordic Market newsletter, include general requirements on remuneration policies and variable remunerations and specific requirements on adjustment of remuneration systems to risks.

Changes securities regulations
The SFSA proposed changes in the regulations (FFFS 2007:16) governing investment services and activities (the securities regulations). The proposal clarifies the allocation of responsibility within the organization and the procedure when applying for a licence to operate securities business. Other changes aim at correcting inaccuracies and to clarify the securities regulations. The proposal for new regulations is caused by the implementation of the new EU fund rules (the UCITS 4-directive). In addition, the SFSA leaves further proposals for amendments in order to simplify and to improve the securities regulations. The amendments are proposed to come into force on 1 July 2011. Opinions related to the proposal can be submitted to the SFSA until 24 March 2011.

Finland

Proposal for revision of Finnish Securities Laws

An initial proposal for a comprehensive revision of Finnish securities laws was completed in February in the form of a working group report. The proposal is fairly ambitious and seeks to improve and modernize Finnish securities laws on a broad basis − both with regard to substance and structure of regulation. Some of the main substantive proposals are outlined below.

Multi-tiered holding; the working group proposes the introduction of provisions that would enable wider use of multi-tiered holding of securities in Finland. Currently, Finnish investors in companies registered in Finland must hold their shares directly as registered shareholders. Only non-Finnish investors are allowed to hold securities registered with nominees, but with the changed rules nominee registration would be permitted for Finnish retail and institutional investors as well. The new regulation would also clarify the status and rights of indirect holders of securities, which facilitates the use of assets for security purposes, for example. The working group paid particular attention to ensuring that the authorities have access to information in the multi-tiered holding system. With this reform, however, information on ultimate account holders and owners would no longer be in the public domain.

Updating takeover regulation; some significant changes are introduced with regard to public bids. Based on Europe-wide concerns on the use of derivatives in bid situations, the laws would be amended so that in calculating shareholdings for mandatory bid purposes, for example, any shares that a person de facto has the ability to ascertain control over would be taken into account (ie. based on forward contracts or other derivative instruments). Even cash settled derivatives could, according to the proposal, be taken into account in certain circumstances. Other significant changes include the introduction of a put up or shut up -rule; i.e. a potential bidder announcing an intention to make a public bid can be required to launch a bid or be prevented from doing so for a set time period. The intention is ensure target companies are not subject to unfounded takeover speculation. In addition, the possibility of “going unconditional” in a tender offer is introduced. A bidder can lock in tendered shares yet allow shareholders to continue to accept the tender offer. Currently, this has not been possible − a situation which has neither been considered to be in the best interest of the bidder nor the shareholders of target companies.

Prospectus requirements are eased for small offerings; the threshold for publishing a full scale prospectus would be triggered in offerings of a value of EUR 5 million or more, and the threshold for publishing a lighter prospectus would be increased from the current EUR 100,000 to EUR 1,5 million (value of securities issued during a 12 month period).

The proposals are expected to be formally adopted during the course of next year.

The AGM Season 2011

The AGM season for this year has started with the introduction of certain new aspects intended to facilitate AGMs of Finnish listed companies.

New recommendations have been issued on certain practical aspects of managing AGMs with the aim to develop uniform practices in Finland. The guidance provides practical advice for shareholder initiatives and registering for general meetings and for how to manage discussions and voting at the meetings. The main substantive proposals are related to voting instructions by foreign investors. Voting instructions issued by a number of non-Finnish investors have often not been aligned with Finnish company law. Typically such investors have only instructed voting against proposals where a counterproposal would in fact be required (election of auditors or the board, for example). Pursuant to the new guidance such votes will not be formally taken into account as votes against the proposal and will further not be noted in the minutes of the general meeting. Proxy agents have been informed of the proposed practice.

Denmark

Continued strain on parts of the financial sector in Denmark opens up acquisition possibilities
On 6 February 2011 the Danish bank Amagerbanken announced that the bank had lost its equity due to extraordinary write-downs. Consequently, Amagerbanken - which is among the top 15 banks in Denmark when it comes to size - is now under liquidation. Amagerbanken was heavily exposed to the Danish real estate market and the first signs of financial troubles for the bank were seen in the fall of 2009 following which a Danish businessman made an aggregate investment in the bank amounting to DKK 500,000,000. Additional steps were taken towards improving the financial situation of the bank in the fall of 2010 when the bank issued further shares in the amount of DKK 900,000,000, allowing the bank to obtain a state guarantee covering Amagerbanken’s issuance of bonds in the amount of DKK 13,500,000,000. However, the efforts were in the end not sufficient to secure the continued operations of the bank.

The activities in Amagerbanken have been transferred to a fully owned subsidiary of the state-owned Financial Stability A/S which sole purpose is inter alia to contribute to ensure financial stability in Denmark, including winding-up of distressed banks. Amagerbanken joins eight other Danish banks which have gone into insolvent liquidation since the summer of 2008, including Roskilde Bank which was the first large bank to collapse in Denmark shortly before Lehmann Brothers’ crash in September 2008.

In the fall of 2008 Roskilde Bank’s 21 branch offices, including 82,000 customers, were - in a quick sales process - split between the three existing Danish banks, Nordea, Spar Nord Bank and Arbejdernes Landsbank. Subsequently, Nordea has also taken over part of the activities of failed Fionia Bank. Most recently, the Danish bank Sparekassen Lolland has signed a share purchase agreement for the share capital in Eik Bank Danmark. The deal is expected to close Q1 2011 after which Sparekassen Lolland will take over the retail activities of Eik Bank Danmark.

According to news reporting quoting the chairman of Financial Stability, Financial Stability intends to initiate a sale of Amagerbanken’s assets in April this year. The chairman is further quoted for stating that the viable assets are probably sold to one buyer who will most likely be a Danish or a Swedish bank.

Fit and proper evaluations
In a continued effort to contribute to the stability of the financial sector in Denmark the Danish Financial Supervisory Authority - the DFSA - has within the past year initiated seven fit and proper evaluations of management members in businesses under its supervision of which three were managing directors in financial institutions. All three managing directors subject to the evaluations have subsequently left their positions with the institutions.

Registration of large customers
As a measure to identify early signs of financial distress in customers with large engagements in Danish banks the DFSA expects to launch a new register of bank customers whose engagements with a bank exceeds a certain percentage of the bank’s capital base. The DFSA stresses that the new register will not exempt the managements in the Danish banks from their duty to perform a diligent credit rating of the banks’ customers.

Norway

Oslo Stock Exchange

Changes in the stock exchange’s requirements on the independence of the board
At least two of the board members elected by the shareholders must be independent in relation to the company’s daily management, material business engagements and major shareholders in order for a company to be listed on the Oslo Børs or Oslo Axess. This change has been made in provision 2.3.6 listing rules for the Oslo Børs and provision 2.3.2 listing rules for Oslo Axess respectively. The changed rules are applicable on listing applications received after 8 February 2011 (the date of the circular). Following this change, the rule in provision 2.3 in continuing obligations concerning the listing demands regarding the composition of the board will no longer be a routine responsibility, and the transitional rule in provision 20 will be abolished. These changes will be effective as of 8 February 2011.

Changes in the Exchange Traded Fund rules - possibility to dispensation from the prospectus requirement when listing an ETF
The ETF legal framework has been amended with regards to the possibility to dispensation from the prospectus requirement for admission to the Oslo Stock Exchange. According to new listing rules, a prospectus must be compiled when listing an ETF, which has to be done in accordance with certain demands on the content followed by a control by the Oslo Børs. According to the Norwegian fund legislation the prospectus does not have to be approved by relevant authorities. A qualified EEA fund can be offered in Norway by passporting the procedure under the UCITS directive. The prospectus for such a fund may be composed according to the prospectus rules in the country where the fund has been established.