Insider trading regulations 2002
The purpose of these changes is to make the prohibition on insider trading and the rules aimed at preventing such trading clearer, more effective and stricter.
The background for the changes can be insider trading regulations 2002 in the view expressed in various quarters that the provisions of the Securities Trading Act on the prohibition of the misuse of insider information have not insider trading regulations 2002 sufficiently effective. The changes to the regulations are intended to contribute to strengthening general confidence in official trading in financial instruments.
The new regulations relate to matters for which there are as yet no established legal precedents, and no technical literature or additional guidance from the drafting of the legislation is currently available. It may accordingly prove difficult to provide an opinion on the detailed implications of the regulations in some cases.
The following comments provide a short summary of the changes in insider trading regulations 2002 regulations that are most pertinent to the users of the exchange. Kredittilsynet has provided a commentary on the recent changes to the Securities Trading Act in its Circular No.
For the sake insider trading regulations 2002 good order a copy of the Kredittilsynet circular is appended to this Circular. We therefore provide here only a short summary of the most important changes to the Securities Trading Act:.
The changes to the Act have removed the reference in the wording to material, and the prohibition now applies to all information that is likely to affect the price. The prohibition comes into effect when such information is not publicly available or commonly known in the market. It was already the case prior to the changes to the Act that individuals privy to insider information as result of their shareholding in an issuer or through their employment, office or assignment undertaken were subject to a duty of confidentiality.
Sectionfirst paragraph, of the Securities Trading Act stipulates that such individuals must not communicate this information to unauthorised parties. The changes to the Act now add a requirement that such persons must exercise due care to ensure that the information does not come into the possession of unauthorised parties. The purpose of this change is to reduce the risk of leaks of price-sensitive information by making the players involved more conscious of their responsibility in this respect.
The wording of the Act does not provide concrete guidance on the measures to insider trading regulations 2002 taken to fulfil this duty of care. In practice many issuers and insider trading regulations 2002 advisers have already established routines for the physical custody, distribution and management of relevant documents as well as for maintaining records of the individuals given access to the relevant information.
The changes to the Act include the abolition of the absolute prohibition on trading in a company? It is accordingly now the case that primary insiders must exercise their own judgement as to whether the process of preparing the company? A particularly important duty for primary insiders is the requirement stipulated by section of the Securities Trading Act to properly investigate whether insider information exists.
The prohibition on trading has been abolished in part because the lowered threshold for the definition of insider information pursuant to section of the Securities Trading Act has reduced the need for such an absolute ban. In addition importance has been attached to the fact that the information provided in published accounts often accords with the market?
The requirement for companies to publish profit warnings pursuant to section of the Stock Exchange Regulations serves to even out to some extent any variation in the information available to different players, insider trading regulations 2002 this has also been taken into account. A company is required to issue a profit warning if it finds, prior to the publication of its annual accounts or an interim report, that it must assume that the profit or loss for the period will be substantially weaker or stronger than the company has reason to believe that the market expects on the basis of the information it has previously published.
The information provided must, in addition to information on the address, employment or office and any other employment, now also include the personal identity number or organisation registration number or similar identification number cf. Sectionfifth paragraph, of the Securities Trading Act.
The purpose of these changes is to improve the efficiency of supervision in order to ensure that the notification requirement is adhered to. Attention is also drawn in respect of the notification requirement to Kredittilsynet?
As noted above, changes have been made to section of the Stock Exchange Regulations. The section now reads as follows changes shown in italics. The issuer shall ensure that no unauthorised party gains access to information encompassed by chapters 5 and 6 or by sectionfirst paragraph, of insider trading regulations 2002 Securities Trading Act until such information has been published in accordance with section If the issuer needs to provide information as mentioned in chapters 5 and 6 or in sectionfirst paragraph, of the Securities Trading Act to someone who is not an employee or officer of the issuer or carrying out an assignment for the issuer, such information shall be notified to the stock exchange together with details of the recipient in accordance with the rules of sectionfourth paragraph.
The issuer shall obtain a statement from the recipient of the information in which the latter undertakes to keep such information secret and not to subscribe for, sell, buy or exchange shares in the issuer or rights thereto until insider trading regulations 2002 information has been published pursuant to section or has otherwise lost its insider trading regulations 2002.
The same applies to shares or rights thereto issued by a company in the same group. The issuer shall immediately upon request by the stock exchange send a copy of such a statement to the stock exchange. If the issuer has reason to believe that information as mentioned in the first paragraph is known to or is about to become known to unauthorised parties, the issuer shall on its own initiative promptly publish the information in accordance with section ?
As can be seen from section of the Stock Exchange Regulations, the duty of confidentiality imposed on listed companies pursuant to chapters 5 and 6 of the Stock Exchange Regulations has now been extended to include information that gives rise to a prohibition on trading pursuant to sectionfirst paragraph, of the Securities Trading Act.
This also applies to the requirement that where such information is made available insider trading regulations 2002 third parties, the listed company must obtain confidentiality statements and statements agreeing to refrain from trading in the securities in question from the recipients of the insider trading regulations 2002, cf. The changes to sectionfirst paragraph, of the Stock Exchange Regulations also impose a more stringent duty of disclosure on the issuing company in a situation where information subject to the duty of confidentiality in the relevant regulations becomes known by, or is about to become known by, any unauthorised party.
It is a fundamental principle for orderly trading in securities that all players have equal and simultaneous access to all information that is relevant to decisions on the purchase or sale of securities.
The changes to the Stock Exchange Regulations, together with the changes to chapter 2 of the Securities Trading Act, are also intended to create greater notoriety in respect of the responsibility involved in disseminating and receiving price-sensitive information. The changes to the regulations also represent increased focus by the supervision authorities on the prevention of leaks of insider information.
Sections and apply to companies with listed shares and borrowers with listed bonds respectively. The regulations in question are typically more relevant to companies which issue listed shares since the extent of price sensitive information is normally greater in respect of shares. The following comments therefore insider trading regulations 2002 directly only to section but apply equally to borrowers pursuant to section The duty of confidentiality for listed companies imposed insider trading regulations 2002 sectionfirst paragraph, previously applied only to information subject to the requirements of the Stock Exchange Regulations on insider trading regulations 2002.
In practical terms this led to questions as insider trading regulations 2002 whether information fell within the definition of information assumed to have a material bearing on the price of a company? The insider trading regulations 2002 to the Stock Exchange Regulations extends the duty of confidentiality, by reference to sectionfirst paragraph, of the Securities Trading Act, to information about the financial instruments, the issuers thereof or about other factors which is likely to influence the price and which is not publicly available or commonly known in the market.
The threshold at which information is considered to insider trading regulations 2002 within the ambit of the duty of confidentiality is accordingly considered to be lower. However the threshold at which information is considered to be price sensitive will normally be the same.
The first effect of the changes to the regulations is that the duty imposed on the issuer to insider trading regulations 2002 statements on confidentiality and restraint from trading will apply to many more situations than is currently the case. This is because the threshold for the type of information which creates such a duty is now lowered to include the new criteria in respect of insider information found in sectionfirst paragraph, of the Securities Trading Act.
This serves to underline that the issuer cannot wait and collect statements after the event. This rule is also intended to create greater notoriety in respect of the responsibility involved in disseminating and receiving price-sensitive information, both for the company and for the recipients of insider trading regulations 2002 information.
This rule does not prevent the practical management of lists and statements being carried out by a company? The paragraph requires that such information shall be notified to the stock exchange, cf. This does not create any particular problems if the information in question is specific in nature.
In practice companies often provide access to a wide range of information about all or part of their activities as part of a due-diligence process. It is important that this information is specifically identified since this will determine the insider trading regulations 2002 that must be published before the person or persons granted access can be released from their statements on confidentiality and restraint from trading.
No particular format has been produced for such notifications. This paragraph applies in addition to the obligations imposed by chapter 2 of the Securities Trading Act. In the first place this requires that issuers must both produce lists of the individuals who are given access to information pursuant to sectionthird paragraph, of the Securities Trading Act as well as obtaining statements from such persons pursuant to sectionsecond paragraph, insider trading regulations 2002 the Stock Exchange Regulations.
Sectionthird paragraph, of the Securities Trading Act and sectionsecond paragraph, of the Stock Exchange Regulations have somewhat different scope. This may be summarised in tabular form as follows:. Issuers may find that the most practical approach will be to apply the widest definition of affected individuals in respect of both statements and lists.
The relevant provisions refer to physical persons. It is therefore not sufficient to record the name of a company or firm, and all the individuals in the company or firm that receive the information must be listed in their own right. The list must be updated whenever there is a change in the persons affected. It should also be noted that the changes to the Stock Exchange regulations provide for the prohibition on trading contained in the statement required by sectionsecond paragraph, of the Stock Exchange Regulations to be equivalent to the prohibition on trading provided for by section of the Securities Trading Act.
The paragraph requires that persons who receive information are subject to a prohibition on trading and a duty of confidentiality, and this may create some difficulty if the matter in question e. The regulations imply that in such a situation the prohibition on trading will continue to apply until the information has lost its relevance unless the company chooses to publish the appropriate information even though it is not subject to the duty of disclosure.
One possible approach to avoid this situation is to use a third party, typically a law firm or accounting firm, to receive and evaluate the information in question or to undertake a due-diligence review. If the adviser is instructed only to verify specific information which is otherwise commonly known, the instructing party can receive the conclusions of the review and this can subsequently be published.
The instruction to the adviser will typically take the form of investigating whether there are any reasons to believe that the published accounts and announcements of the company in question do not give a correct picture of its financial position.
The reference to unauthorised persons in the section does not provide any further direct guidance insider trading regulations 2002 to which persons are unauthorised. Section insider trading regulations 2002, second paragraph, implies that employees insider trading regulations 2002 offices of the insider trading regulations 2002 or anyone carrying out an assignment for the issuer can be deemed to be an authorised party.
The same categories of person are also mentioned in sectionfirst paragraph, of the Securities Trading Act, which in addition states that the duty of confidentiality and prohibition on giving advice applies to? Persons who by virtue of their holding in the issuing undertaking [?
The second paragraph of the relevant section of the regulations also envisages that parties other than these may be given access to information? This will typically be of relevance when preparing for transactions such as purchases or sales of business activities, mergers, take-over bids for a company etc.
The regulations do not in themselves restrict a company? If there is reason in a particular case to permit selective access to company information to a specific party without releasing the same information to all shareholders, this must be undertaken in accordance with the general principles on equality of treatment, including sections and of the Public Limited Companies Act and section of the Stock Exchange Regulations.
The changes made to sectionfirst paragraph, of the Stock Exchange Regulations imply that a company becomes subject to the duty of disclosure if it has reason to believe that information is either known by or is about to be known by any unauthorised party, cf.
This implies that in such a situation a company must issue a stock exchange announcement on matters which would not otherwise be deemed to have reached a stage of advancement sufficient to trigger the duty of disclosure as required by the regulations on the provision of information. The company will accordingly then be made aware that there is a leak of information sufficient to trigger the duty of disclosure. Stricter rules on insider trading, duty of disclosure and the management of insider information.
We therefore provide here only a short summary of the most important changes to the Securities Trading Act: Changes to sections and of the Stock Exchange Insider trading regulations 2002 2. This may be summarised in tabular form as follows: Circular No pdf, kB. Appendix to circular no.
Legal affairs legal oslobors. Information to be submitted. Section 3 STA. Section 2 SER. Notification and collect statements.