When Does Silence Become a Disclosure Failure? Lessons from a Finnish Profit Warning Case

Author: Elina Toivakainen Read time: 4 min

A recent Finnish non-prosecution decision concerning a listed company’s profit warning highlights the fine line between timely, complete disclosure and a defensible delay. It also illustrates how a prosecutor may assess that line differently from a securities regulator.

Key Facts of the Case

The case concerns a Finnish company that was listed on Nasdaq First North Growth Market Finland following its IPO. In April 2022, the company published an EU growth prospectus containing a profit forecast for the ongoing financial year. In June, the company issued a profit warning, after it became likely that the forecast range would not be met. The warning did not include a revised numerical forecast, and the extent of the company’s loss-making position became apparent only when its half-year report was published on 15 September 2022. Following the publication of the report, the company’s share price fell by nearly 30 percent. The company had engaged a legal adviser and financial adviser in connection with the IPO process, and the company retained a certified adviser after listing, as required under the First North rules.

The Regulator’s Stance: 1) Timing Was Delayed and 2) Disclosure Was Materially Incomplete

A profit warning must be issued as soon as information about a material change in financial performance becomes sufficiently precise to allow an assessment of its likely effect on the share price. In this case, the regulator deemed that this threshold had been reached roughly a month before the company actually issued its warning, i.e. in May 2022. The regulator also considered the warning to have been materially incomplete. In the regulator’s assessment, the company should have disclosed that the business had turned loss-making — a significant omission given that the earlier guidance for the year had projected a positive revenue and EBITDA.

How the Prosecutor Saw It Differently

The prosecutor — having the final say by taking a non-prosecution decision — took a different view on both issues raised by the regulator. On timing, a delay of about a month from the regulator’s preferred disclosure date was not considered decisive. The prosecutor noted that the underlying data available at the earlier stage remained incomplete, and that those responsible had no reason to believe a disclosure obligation had already arisen. On content, the prosecutor considered the warning sufficiently complete since it included the information that was genuinely material to investors at the time. In the prosecutor’s view, issuing a new numerical forecast based on unreliable data could itself have been misleading rather than protective of investors. The non-prosecution decision issued by the prosecutor concluded the criminal proceedings in the matter.

The Takeaway

The case illustrates a recurring tension in market disclosure enforcement. Regulators often assess materiality and timing with the benefit of hindsight, applying a bright-line “as soon as reasonably possible” standard. Criminal liability, by contrast, requires proof of intent or gross negligence based on what was known at the time the decision was made. A company that waits for data to become sufficiently reliable before issuing or revising guidance is therefore not automatically exposed to criminal liability, even if a regulator later concludes that its warning was delayed or incomplete.

Key takeaways from this case include:

• Profit warnings should be consistent with the company’s earlier guidance. Where the underlying data is not yet reliable enough to support a revised numerical forecast, the company should explain the key factors behind the change in outlook rather than issue a figure it cannot stand behind. A premature or inaccurate forecast risks misleading investors and may itself give rise to liability.

• Using external advisers — whether legal, financial, or certified — does not, in itself, relieve a company of its disclosure obligations. The board remains ultimately responsible for deciding when and what to disclose. That said, engagement with professional advisers serves as evidence and supports the fact that the board acted with due care when making those decisions.

• Boards and management should be aware that a regulator and a prosecutor may assess the same set of facts differently. A regulatory finding that a profit warning was delayed or incomplete does not, in itself, give rise to criminal liability, but it can nonetheless cause significant reputational damage and trigger supervisory action.

• When it comes to the timing of a profit warning, companies should maintain a clear contemporaneous record of why the available data was not yet considered sufficiently reliable to justify earlier disclosure. A well-maintained record can be key to demonstrating that the decision reflected a reasonable exercise of judgment rather than a disclosure failure.