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Nordic Market Newsletter 10/2012

12 November 2012


DS 2012:39, OTC derivatives, central counterparties and trade repositories

On 16 August 2012, the European Regulation on OTC derivatives, central counterparties and trade repositories came into force. The aim of the Regulation is to reduce the risks of trading in derivatives outside of regulated markets (OTC derivatives). The Regulation includes rules on mandatory clearing through central counterparties (CCPs) for OTC derivatives designated as suitable for clearing, reporting requirement of derivative contracts to trade repositories and CCP’s authorization and registration of trade repositories. The competent national authorities are responsible for the supervision of CCPs and for the supervision of the clearing and reporting requirements. European Securities and Markets Authority (ESMA) is responsible for the supervision of trade repositories.

The Swedish Ministry of Finance has submitted a proposal for a new law to enact a legal framework for the Regulation. The new law provides that the Swedish Financial Supervisory Authority (Sw: Finansinspektionen) would be the competent authority in Sweden under the Regulation. It also establishes rules on the Financial Supervisory Authority’s (FSA’s) investigative and enforcement powers, as well as the FSA’s cooperation with ESMA and the competent authorities of other Member States. Under current law, a clearinghouse that acts as a CCP is regulated by the Securities Markets Act (2007:528) (Sw: lagen om värdepappersmarknaden). The Ministry of Finance proposes that the regulation on competent authority and the investigative and enforcement powers regarding CCPs will not be amended. In addition to the rules established by the Regulation, the new Act and the Securities Markets Act, further provisions will follow through delegated legislation and regulatory technical standards adopted by the Commission. The new law is suggested to come into force on 1 May 2013.

Suggestion on new legislation for Alternative Investment Fund Managers

The AIFM Inquiry has delivered its report. The main task of the Inquiry was to analyse and prepare proposals for amendments which may be needed to Swedish legislation for the implementation of the Directive on Alternative Investment Fund Managers (AIFM Directive) into Swedish legislation. The AIFM Directive aims to establish a harmonized EU regulation of managers of alternative investment funds. Such managers and funds have so far been subject to the national law of the Member States. It was part of the remit of the Inquiry to avoid exceeding the minimum requirements laid down in the Directive unless this is deemed necessary on grounds of systemic risk or investor protection. The remit also included reviewing the regulation of contractual funds that are not mutual funds (special funds), including those not covered by the AIFM Directive.

Swedish Government commissions an investigation on combating market abuse

The Government resolved on 18 October 2012 to commission an investigation to propose how Swedish legislation should be revised to satisfy the requirements in future EU legislation on insider trading and market manipulation. Further, the commission will decide how the investigation and prosecution of market abuse should be carried out in Sweden. The report is due by 31 December 2013.

Faster payments

The Swedish Government decided on 18 October 2012 to adopt legislative proposals to combat late payment and long payment terms in commercial relationships. Faster payment times could help decrease companies’ financial and administration costs, improve the conditions for healthy competition and, in the long terms, improve public finances. The proposals implement a new EU directive to combat late payments in connection with business transactions. The legislation is proposed to come into force on 1 March 2013.

Insider dealing

Uppsala District Court has sentenced a man for aggravated insider dealing. The man was a member of the board of directors of a company listed on Nasdaq OMX First North. Sometime during February 2009, he received information about the content of the company's year-end report for 2008. He then sold about 20,000 shares in the company. The man was also sentenced for attempted aggravated insider dealing, when he later during 2009 acted on other information received in his capacity as board member. The District Court stated that the man's trading in shares in close proximity to the reports, both before and after the reports, in itself confirms that he was acting on information that may not have been available to everyone on the market. The District Court found that the man on two separate occasions during a board meeting at which he received the inside information, intentionally sold shares in the company and in one case also tried to sell shares in the company. Against that background and the repeated trading patterns involving substantial amounts relative to the level of trading considered normal, the District Court held that the crime should be assessed as aggravated.

NASDAQ OMX Stockholm Disciplinary Committee gives Nobia AB a warning

Nobia was censured for failing to disclose its quarterly report for the second quarter of 2012 in the proper way, because the report was made available via Nobia’s website before it had been disclosed to the public through a press release. Nobia discovered the error and reported the incident to the exchange’s market surveillance. Based on an overall assessment of the circumstances and consideration of previous similar cases (see for example the decisions 2008:6 and 07 as well as 2011:07) the Disciplinary Committee considered the breach of a less serious nature and therefore gave Nobia a warning.

The Swedish Securities Council

Statement 2012:25 concerned a request from Östersjöstiftelsen (the Trust) regarding exemptions from the mandatory bid requirement with reference to shares in LightLab AB. A planned new issue of shares occasioned the request, in relation which the Trust intended both to use its preferential right to subscribe for shares and pre-emptive rights and to fulfil its guarantee commitment by subscribing for additional shares and pre-emptive rights. The Securities Council reiterated the principle that exemption from the mandatory bid requirement may be granted if the holding has arisen because a shareholder has used his preferential right to subscribe for shares in a new issue of shares and the threshold for a mandatory bid requirement has been crossed because other shareholders have not used their preferential rights. The Securities Council stated that exemption from the mandatory bid requirement could also be granted under certain conditions due to fulfilment of a guarantee commitment at a new issue of shares. The Securities Council decided to grant exemption from the mandatory bid requirement under the conditions that, first, the company’s other shareholders be informed about the Trust’s potential ownership situation before the shareholders’ meeting and, second, that a supermajority of the shareholders support the decision to issue new shares at such meeting.


Intellectual Property Rights

UK copyright reforms – the duration of the UK copyright protection is under revision
Under the current copyright laws in the UK, the duration of protection of a piece of artistic work depends on whether the article is considered to have been industrially exploited.

An article is considered to have been industrially exploited once more than 50 pieces of such work have been made and sold, in which case the duration of protection is limited to 25 years after the first marketing of the design. A piece of artistic work which has not been industrially exploited is however protected for the duration of the life of the creator plus 70 years.

By comparison, the duration of copyrights in Denmark is irrespective of the industrial exploitation, and thus has a duration of the creator's life plus 70 years. The discrepancy in duration of copyright protection in the two countries has been detrimental to late but famous Danish designers – as the difference in the length of protection, in many cases up to 50 or 100 years in many ways makes the Danish duration of protection illusory. Especially, many Danish consumers have until now taken advantage of the discrepancy and imported replicas of famous Danish architectural furniture for personal use.

Now however, the UK government has proposed that the copyright protection is to be enforceable beyond the current 25 years to a term of the creator's life plus 70 years, identical to Danish law. Under this new measure, certain ‘artistic’ designs of manufactured goods (for example certain furniture, lamps and jewellery) created before 1987 will be protected from unauthorised copying under copyright law and the sale of replicas of famous furniture from the UK to Denmark will as a consequence be illegal and lowered effectively.

The general debate on all aspects of the bill in the UK is scheduled for 14 November 2012.

The Consumer Ombudsman is taking action against deceptive warranties

The Danish Consumer Ombudsman has recently initiated check-ups on companies’ consumer warranties. The inspections show that even large companies’ warranties are often in conflict with the Danish Marketing Practices Act.

The Consumer Ombudsman has expressed clear rules on the matter. They are as follows:

The Danish word “garanti” (i.e. warranty/guaranty) can only be used if the warranty provides the consumer with a considerably better protection that the protection provided for in the Danish Sales of Goods Act.

When a warranty is given to a consumer, the tradesman must clearly elucidate i) what the content of the warranty is and ii) that the consumer’s indispensable rights according to the Danish Sales of Goods Act are not affected by the warranty.

The Consumer Ombudsman is competent to take judicial action against companies that are acting contrary to the rules.


Revised edition of the Norwegian Code of Practice for Corporate Governance

On 23 October 2012, the Norwegian Corporate Governance Board (NCGB) published a revised edition of the Norwegian Code of Practice for Corporate Governance. Changes were made regarding the rules on: implementation and reporting on corporate governance, equal treatment of shareholders and transactions with close associates, the nomination committee, the corporate assembly and board of directors and their composition and independence, risk management and internal control and take-overs. Companies should report in accordance with the new Code of Practice with effect from the 2012 annual report.