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Nordic Market Newsletter

12 October 2011


New UK Bribery Act
The new UK Bribery Act (the “Act”), which reforms UK criminal law on bribery to provide for a new consolidated list of bribery offences in order to cover all bribery in the UK and abroad, came into force on 01 July 2011. The Act has been referred to as the strictest anti-bribery legislation in the world, having extraterritorial scope and going even further than the US Foreign Corrupt Practices Act (FCPA). Due to the wide jurisdiction, all companies worldwide which carry out business in the UK must take the Act into account and ensure compliance with its provisions.

The Act includes four offences: bribing another (active bribery), being bribed (passive bribery), bribing a foreign public official and failure of a commercial organisation to prevent bribery by an associate, which is introduced as a new offence. The corporate offence of failure to prevent bribery has wide extraterritorial scope since it covers, in addition to acts of a company incorporated in the UK, acts committed by an associate who performs services for or on behalf of the company (e.g., employees, agents, subsidiaries, etc.) anywhere in the world, if the commercial organisation performs any part of its business in the UK.

A commercial organisation will be liable for actions of an associate unless it can show that there were adequate procedures to prevent the bribery (statutory defence). The UK Government has published information explaining, inter alia, what is meant by adequate procedures and has introduced six principles (Proportionate Measures, Top-Level Commitment, Risk Assessment, Due Diligence, Communication and Monitoring) based on which the adequate procedures are assessed.

The penalties for the bribery offences are high: for an individual, the penalty is up to ten years’ imprisonment and unlimited fines, and for a commercial organisation, the penalty is an unlimited fine. It should be noted that senior officers of companies may be convicted if an offence has been committed with their consent or connivance.
Therefore, all companies performing any part of their business in the UK should immediately confirm that the company’s anti-bribery procedures are in line with the reformed UK regulation.


Finnish FSA Decision on Notifying on Ownership in Listed Companies
On 31 August 2011, the Finnish Financial Supervisory Authority (FFSA) issued a public reprimand to OP-Pohjola Group Central Cooperative (which operates as the central institution of the cooperative banks group), for the failure to comply with the obligation to disclose holdings in listed companies. In autumn 2010, the organisation issued five notices on exceeding or going below an ownership threshold (1/20 of holdings) in listed companies, but the notices were issued with a delay of from 4 to 13 business days. According to the FFSA, the disclosures had not been made “without undue delay”, i.e., in accordance with the requirements of the Finnish Securities Market Act. Due to shortcomings in the monitoring system, the Cooperative was not able to issue disclosures on its consolidated holdings within the time stipulated by law.

According to applicable regulations, a central institution of an amalgamation of deposit banks is required to have internal control and risk management systems in place that are adequate for its operations. Internal control must ensure, for example, compliance with disclosure provisions and calculation of consolidated holdings of the group in listed companies.

This reprimand implies that the requirements for the control and risk management systems are interpreted strictly. In its decision, the FFSA guided that monitoring the flagging obligation on a weekly basis was not enough to fulfil these obligations.
The standard set by the FFSA needs to be taken into consideration when drawing up internal monitoring, control and risk management systems, as well as internal reporting and communications processes, in particular, in institutions actively trading with listed securities. Consolidated ownership in listed companies should be reported and the applicability of disclosure obligations should be assessed on a daily basis. Reprimands can, however, be avoided if a delay or other error or neglect, which is not serious or repeated, is sufficiently and immediately remedied by the shareholder upon discovery.


Change of Lease Rent
On 26 August 2011, in court case T 13087-09, the Stockholm District Court rendered judgment in a dispute between SL Finans and Handelsbanken Finans concerning a large number of lease agreements in regard to, inter alia, underground railway carriages and buses.

During the autumn of 2008, Handelsbanken, in response to increased financing costs, replaced the reference interest rate agreed upon by the parties in the lease agreements with a new and higher reference rate. The main issue in the case was the interpretation of the provision of the agreement referred to by Handelsbanken in support of its interest change. The district court agreed with SL’s interpretation and has obligated Handelsbanken to pay back part of the lease charges. Handelsbanken has appealed the judgment to the Court of Appeals.

No Undue Market Influence Committed by Carnegie Employees
Through a verdict on 15 September 2011, case number B 389-11, the Court of Appeals upheld the verdict by the Stockholm District Court and acquitted three defendants, former employees of the investment bank Carnegie, which were accused of undue market influence. The charges were based on the accusation that the defendants conducted orders and transactions with the purpose of increasing the market value of certain put and call options and thus, the value of the portfolios managed by the defendants. However, the Court of Appeals found that the circumstances pleaded in the defendants’ defence were not rebutted by the prosecutor, and the charges for undue market influence were consequently dismissed.

The Swedish Companies Registration Office Assumes Responsibility for Matters from the District Courts
The Swedish Companies Registration Office assumes responsibility for a number of matters which had previously been handled by the district courts. The changes entered into force on 1 October 2011 and concern:

  • Certain matters regarding the cancellation of lost documents;
  • Matters according to the Swedish Companies Act and the Cooperative Associations Act regulating the fact that an asset under certain circumstances shall befall the Swedish Inheritance Fund;
  • The appointment of substitutes for members of the board of directors in limited liability companies;
  • The appointment of fiduciary possessors in the event of the redemption of minority shares; and
  • The liquidation of banking companies, member banks and, in under certain circumstances, savings banks.

Review of the Rules and Regulations Pertaining to AP-funds
In Committee Directive 2011:84, it was resolved that a special investigator will evaluate the National Pension Insurance Funds Act (AP-Funds) (2000:192) and the Sixth AP-Fund Act (2000:193) in order to establish long term, efficient management of the pension system’s buffer capital. The investigator will submit proposals of necessary amendments to legislators and give the account of the results on 01 August 2012, at the latest. During the course of the investigation, the investigator will, inter alia, evaluate the mission and placement provisions of the First-Fourth AP-Funds, investigate the possibilities for managing the buffer capital more efficiently and evaluate the mission, target and placement provisions of the Sixth AP-Fund.

Alternatives Investment Funds Management
The Swedish Ministry of Finance has, through Committee Directive 2011:77, resolved to appoint a special investigator for the purpose of investigating how to implement the EU Directive on Alternative Investment Fund Managers into Swedish law. Justice of the Supreme Court, Ann-Christine Lindeblad, has been appointed as the special investigator. The results of the assignment will be presented, at the latest, on 30 September 2012.

New Rules on Arbitration
The International Chamber of Commerce has, after a review initiated 2008, presented a revised version of the rules of arbitration which will enter into force at the start of 2012. The purpose of the revised rules is to better meet companies’ needs in international commerce and international investments. The rules of arbitration have been expanded to include, inter alia, provisions for handling disputes related to several contracts and a large number of parties, as well as provisions regarding the appointment of an emergency arbitrator for urgent measures.

Statements by the Swedish Securities Council

  • In Statement 2011:21 (Ratos), Ratos requested court proceedings on an intended measure regarding handling unexercised subscription rights in connection with a new issue of shares with preferential rights. The purpose of the procedure was to lessen the risk that shareholders who do not exercise their subscription rights would suffer value losses, as well as that the company would have to raise additional financing following insufficient subscription to a new issue of shares with preferential rights. The procedure does, in short, require that a bank borrows shares on the market in an amount corresponding to the number of shares which were not subscribed to in the new issue of shares in order to sell them on the market. The purchase price for the shares which have been sold will be used for subscription and payment of the number of shares which could otherwise have been subscribed for on the basis of the unexercised subscription rights. The shareholders who have not exercised their subscription rights will be entitled to the purchase price, after the deduction of expenses.

    According to the Swedish Securities Council, contrary to what is customary in new issues of shares with preferential rights, no such rights where applicable to the bank’s share sales. In its placement of the borrowed shares, the bank will neither be subject to the corporate law restrictions applicable to direct new issues of shares, nor will the meeting of shareholders resolve upon any distribution principle according to chapter 13, section 4 of the Swedish Companies Act, which regulates how the board of directors handles subscriptions performed without subscription rights. The bank will instead be allowed to place the shares with any investor who acknowledges his or her interest in the shares. The Swedish Securities Council found that the procedure could not be deemed acceptable, especially as the problems with unexercised subscription rights were considered limited in most cases.

  • The Swedish Securities Council, in Statement 2011:22 (Victory Life), granted Victory Life & Pension an exemption from the mandatory bid requirement. Victory Life’s holding of shares in RGIF Sweden, listed on Aktietorget, in connection with the management of individual capital sum-insurances, passed the threshold for the mandatory bid requirement. All the insurance holder’s shares were held in separate accounts, and the account with the largest holding in RGIF accounted for 2.1 per cent. According to the Swedish Securities Council, the purposes behind the mandatory bid requirement was not applicable to situations where a pension insurance company, as a result of a decision by the collective of insurance holders, formally becomes the owner of an equity interest in a company, which exceeds the mandatory bid threshold but without exercising any voting power for these shares.


Capital Markets
Enhanced Focus on Regulatory Compliance

The Danish Financial Supervisory Authority (“DFSA”) has recently enhanced its focus on listed companies’ regulatory compliance. Several Danish public companies are currently being investigated for suspicion of insider trading and price manipulation.

A Danish insurance company and a Danish financial institution were reported to the police by the DFSA more than a year ago, as the insurance company allegedly leaked market-related information to the financial institution, leading to illegal insider trading. Ensuring full confidentiality in the police’s investigation, the announcement has just recently been published by the DFSA.

According to the announcement from the DFSA, the financial institution sent e-mails to a number of its customers, reporting information received from the insurance company, saying that the insurance company would soon be making a negative announcement due to “uncertainty in the market”. The e-mail reportedly led to a significant increase in the trade of shares by the customers. The following day the insurance company made a public announcement informing the market that the company would record extraordinary losses of about DKK 700 million (EUR 90 million).

The DFSA has found that the advance announcement to the financial institution and the forwarding of the information were infringements of the Danish Securities Act. The financial institution has accepted a fine of DKK 100,000 issued by the DFSA, whereas the insurance company has decided to have the matter tried before the Danish courts.

Further, the DFSA has reported another Danish public company and its CEO to the police. The reported actions comprise alleged large-scale buybacks of stock in 2007 and 2008, which allegedly artificially boosted the price for the company’s shares and which may be an infringement of the price manipulation prohibition.

The mentioned cases are a serious reminder for public companies to continuously keep a sharp focus on their regulatory compliance.

Ruling Regarding the Acquisition of the Cimber Sterling Group A/S
Earlier this year, a controlling stake in the struggling Danish airline company Cimber Sterling Group A/S (“Cimber”) was acquired by the Cyprus-based Mansvell Enterprises Ltd (Mansvell). Mansvell’s acquisition of a 70 per cent stake in a directed issue triggered a mandatory offer to the remaining shareholders under applicable Danish law. In the mandatory offer, Mansvell offered the same price to the remaining shareholders as Mansvell had paid in the triggering acquisition. The price, however, was significantly lower than the public trading price of the shares at the time of the takeover.

Based on the facts that (i) the vast majority of the shareholders in Cimber (99.75 per cent) approved the subscription price in the directed issue, (ii) the company was in distress, (iii) the shares in the company were generally perceived as illiquid and (iv) the higher trading price at the time of the takeover was a consequence of the press coverage of the ongoing negotiations between Cimber and Mansvell, the Danish Financial Supervisory Authority did not find that the price was flagrantly unfair and sustained the price.