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Nordic Market Newsletter 11/2011

14 December 2011


Government Bill regarding implementation of UCITS IV
The Finnish Government has presented a government bill regarding amendments to the Investment Funds Act (Sijoitusrahastolaki 29.1.1999/48) and thereto related legislation in order to implement Directive 2009/65/EC (UCITS IV). The implementing legislative changes are proposed to enter into force by 31 December 2011.

The main amendments proposed to the Investment Funds Act include new rules in respect of cross-border mergers of UCITS, whereby differences in legal forms of UCITS would no longer form an obstacle to mergers, and the allowance of master-feeder structures which will permit a UCITS to principally invest its assets in another UCITS located either in the same Member State or another Member State. Master-feeder structures are currently only possible for special investment funds in Finland. The proposed amendments also include the introduction of the management company passport, which will permit a management company authorised in one Member State to establish and manage investment funds remotely in any other Member State, either through a branch or on a cross-border basis. Consequently, a management company would no longer need to be located in the home state of the investment fund, but instead, foreign management companies could manage Finnish investment funds and Finnish management companies foreign investment funds.

Changes resulting from UCITS IV also include a reform of the notification procedure for cross-border marketing of UCITS, including improved co-operation mechanism between supervisory authorities of Member States, as well as harmonization of information to be provided by UCITS to investors. The new notification procedure under UCITS IV and the implementing regulation, Commission Regulation (EU) No 584/2010, to UCITS IV have been applied in Finland since 1 July 2011 as well as Commission Regulation (EU) No 583/2010 providing for the key investor information document (KIID), as such regulations are directly applicable in Member States without further national implementation. Consequently, notifications of foreign UCITS regarding the commencement of marketing in Finland have been handled between the supervisory authority of the home Member State of the foreign UCITS and the Finnish Financial Supervisory Authority (FIN-FSA) as of 1 July 2011 and the FIN-SA has accepted the KIID (which will effectively replace the simplified prospectus) instead of the simplified prospectus as of the same date. It should be noted that UCITS IV provides for a 12 month transition period after the deadline for national implementation in respect of the KIID and hence either the KIID or a simplified prospectus may be used during that period by existing UCITS. Simplified prospectuses must be replaced by KIID’s at the latest by 30 June 2012. Other changes to information requirements include more specific provisions on marketing of UCITS and marketing materials and certain changes in language requirements for fund documents. Furthermore, the proposal includes an explicit obligation for the FIN-FSA to keep information on the laws, regulations and administrative provisions which do not fall within the field governed by the Investment Funds Act and which are specifically relevant to the arrangements made for the marketing of foreign UCITS in Finland available on its website.

In addition to changes resulting directly from UCITS IV, the government bill sets out proposals for certain other legislative changes to bring Finnish regulation in line with other European regulation and thereby preserve the competitiveness of Finnish investment funds, including proposals to facilitate a wider scope of different share classes and proposals to amend provisions on the calculation of value in line with European regulatory praxis. Changes with a view to provide for instabilities in securities markets caused by the global financial crisis more effectively are also proposed.


Leave to appeal and insider trading
Two men were sentenced by the district court after involvement in insider trading activities. The district court found that one of the men had provided the other with information from a non-public press release, concerning a future business deal. The recipient of the non-public information bought a large amount of stock in one of the companies concerned. After the press release was made public, the relevant stock’s value increased considerably. The district court found both men guilty. The Court of Appeal concurred with the district court that the primary defendant had received insider information. However the Court of Appeal found that the evidence did not support the finding that the relevant insider information had been derived from the other man. The Swedish Supreme Court has now granted leave to appeal in the case.

Swedish Securities Council
In November, the Swedish Securities Council published four statements:

  • In statement 2011:30 (Allenex) the Swedish Securities Council granted the principal owners an exemption from the mandatory bid rules under condition that a company jointly owned by the owners would aquire all the shares in Allenex.
    The Swedish Securities council also granted an exemption from the obligation to include convertible bonds in the bid. The exemption, in regard to unlisted convertibles could be granted because a delisting of the Allenex share would not affect the conversion right of the convertible. The exemption in regard to listed convertibles was granted on the condition that Allenex would offer early redemption on reasonable terms to the holders.
    The Swedish Securities council further granted BidCo an exemption from the obligation to direct the mandatory bid to shareholders domiciled in a number of countries.
  • In statement 2011:23 (Clean Tech East Holding) the principal owner requested an exemption from the mandatory bid rules regarding an aquistion in connection with a new rights issue.
    The Swedish Securites Council granted an exemption on the condition that, before the shareholders meeting, the other shareholders of Clean Tech should be informed of (i) the undertaking and (ii) the maximun amount of capital and number of votes that the underwriter may receive if the undertaking would be executed. Additionally the undertaking would require support from other shareholders by a 2/3 majority vote.
  • In statement 2011:28 (Öresund), the Swedish Securities Concil found that in some rare cases there may be reason to extend the applicability of the Takeover Rules beyond the strict terms of the Rules. The Council stated that a mandatory bid obligation could apply also to holders of shares who, at the time of the listing, already held shares representing thirty per cent or more of the votes in the company. Further, the Council found that the requirement to make a mandatory bid may be avoided by way of converting class-A shares into class-B shares.
  • In its statement (2011:32) (Wise Group - Resurs Bemanning CNC), the Swedish Securities Council granted an exemption from the obligation to make an offer document public within six weeks of the offer being made. The exemption was warranted in part because the consideration in Wise Group’s offer comprised newly issued shares that were not previously covered by an obligation to issue a prospectus. This meant that, the turnaround time of the Swedish Financial Supervisory Authority was extended as a result of Wise Group not having made a prior prospectus registration.


The new Danish government has presented the Bill for the Financial Act, 2012, which implies changes in the tax laws. The most relevant are:

  • Abolishment of favorable taxation for incentive schemes
    The government proposes to abolish the favorable tax rules applicable to certain incentive schemes by repealing the current section 7A (relating to general schemes for all employees) and section 7H (relating to individual schemes mainly to key employees/management) of the Danish Tax Assessment Act. This entails that profits earned by the employee on the basis of the shares granted to, purchased or subscribed by the employee as part of an incentive scheme will be subject to income tax instead of the current (lower) capital gains tax on shares. The proposed transition rules permit the continued application of section 7A in respect of shares, options or warrants allotted to the employee before 31 December 2012 provided that the agreement to grant shares, options or warrants is entered into prior to 21 November 2011 and for incentive schemes comprised by section 7H, section 7H will apply continuously to agreements on grant of shares, options or warrants entered into prior to 21 November 2011.
  • Slight reduction on taxation on employer paid phones
    The much debated multimedia tax which was implemented on 1 January 2010 will be abolished. The multimedia tax will be replaced by a tax on employer paid phones. The taxable amount is fixed at DKK 2,500 with a reduction of 25% for spouses who are both subject to the employer paid phone tax. For comparison the present rules on multimedia tax fix the taxable amount at DKK 3,000.
  • Tax credit for research and development companies
    The government further proposes to help start-up companies and self-employed business investing in research and development. Current rules allow such businesses to deduct research and development expenses from their profit. Since research and development start-ups rarely make a profit in the first years, these businesses will now be allowed a tax credit of the tax value of their tax losses deriving from research and development activities up to DKK 5 million. With a corporate tax rate of 25% the maximum tax credit per year is DKK 1.25 million. Any exceeding tax losses may be carried forward under the existing rules.
  • Tightening of the tax succession rules in “family” succession
    It is proposed to amend the tax succession rules in relation to family succession. The current tax succession rules apply when the shares being transferred make up at least 1% of the company’s share capital and if the company is not predominantly engaged in activities such as lease of real estate, possession of cash or possession of shares. Whether or not the company is predominantly engaged in the above mentioned activities is determined if such activities make up at least 75% of the company’s assets or income. The proposed tax rules determine that if at least 25% of the company’s assets or income is covered by the above mentioned activities, it is not possible to use the tax succession rules.

Landmark Ruling from the Supreme Court
On 29 November 2011, the Supreme Court rendered its decision in Symbion Capital I A/S vs. the Ministry of Taxation. Reversing the High Court’s judgment, the Supreme Court ruled in favour of Symbion Capital and allowed the full deduction of management fees.

The Ministry of Taxation supported by the High Court claimed that the management fees incurred by a venture fund were not deductible since the income generated presumably and predominantly would be tax exempt capital gains on portfolio shares (at the relevant time capital gains on portfolio shares held for more than three years were exempt). The venture fund had, however, earned substantial taxable income and although the venture fund might have had the intention of mainly generating tax exempt income, the Supreme Court found that since the actual income realized was predominantly taxable the management fees constituted tax deductible costs.


New mutual funds law (Lov om verdipapirfond)
A new law on mutual funds has recently been enacted implementing EEA rules corresponding to the UCITS IV Directive. The law applies to mutual funds and the management of mutual funds, foreign mutual funds marketed in Norway, as well as foreign fund managers’ access to establishment in Norway. The law will come into force on 1 January 2012.

Amendments to the Payment Systems Act and the Financial Institutions Act et cetera
Amendments to the Payment Systems Act and the Financial Institutions Act et cetera (Lov om endringer i betalingssystemloven og finansieringsvirksomhetsloven mv.) have recently been enacted in order to implement EEC rules corresponding to Directives 2009/55/EC (tax exemptions applicable to personal property of individuals) and 2009/110/EC (e-money institutions). The amendments will come into force on 1 January 2012.

Amendments to the Derivatives Rules of the Oslo Stock Exchange
The Oslo Stock Exchange recently adopted certain amendments to the practice of option exercise and delisting in the underlying instrument in an effort to harmonize its Derivatives Rules with other international marketplaces. The main changes include the delivery of stocks subsequent to an exercise being reduced from 4 to 3 days, the holders of contracts with expiry from October 2012 being compensated for their time loss value where the underlying security is delisted prior to expiration date, and the fixing price for stock derivatives changing from volume weighted average to last traded price