Continuous Disclosure Obligation
The legislation regulating the securities market in Finland consists of one framework law, the Securities Markets Act, in which the following European Union (EU) directives have been implemented:
- Admission Directive (79/279/EEC);
- Listing Particulars Directive (80/390/EEC);
- Interim Reports Directive (82/121/EEC); and
- Public Offers Directive (89/298/EEC).
In addition market participants must observe (i) the regulations issued by the ministry of finance, which is responsible for securities legislation and authorization of self-regulatory rules, and (ii) the regulations and guidelines issued by the Financial Supervision Authority (FSA).
The FSA in turn is responsible for supervising the market (including banks, brokerage firms, exchanges and mutual funds). It may issue regulations targeted at these supervised entities concerning the application and observance of the law, and also issue guidelines in accordance with its supervisory role. Regulations issued by the FSA are legally binding.
Under the delegating provisions of the act the ministry of finance has issued detailed provisions on matters including:
- listing particulars;
- listing requirements; and
- mutual recognition of listing particulars and prospectuses.
The FSA has also issued detailed guidelines on securities offerings and the obligation to provide information, which includes rules on:
- issuance and offerings of securities;
- takeovers and public bids; and
- disclosure of beneficial ownership and information affecting value of publicly traded securities.
In addition to the basic regulation, any issuing company listed - or wanting to list - on the Helsinki Stock Exchange (HEX) must comply with the more specific stock exchange rules. These rules are in turn approved by the ministry of finance. The stock market of HEX is divided into:
- Main List;
- I-list (previously OTC list);
- NM list (new market); and
General disclosure requirements are basically the same for any listing application (listing particulars) and the same goes for the continuous reporting obligations of publicly traded companies. However, individual listing requirements differ depending on the targeted list.
The Finnish Companies Act makes a distinction between public and non-public limited companies and only securities of a public company can be subject to public trading.
Anyone who offers securities to the public is obliged to publish a prospectus or listing particulars, as the case may be, before the start of the offer and must make them available for the public during the whole offering period. The offering document may only be published after FSA approval. The FSA may demand that the filed document is amended or corrected to fulfil the requirements of the act and subsequent regulations.
The FSA makes no determination on the soundness of the proposed investment but does require that the disclosure in the offering document is sufficient to allow an educated opinion to be formed on the issuer and securities in question.
The question of whether an offer is public depends on the circumstances of the individual offer. The concepts and circumstances that distinguish public from private offerings have not been defined in the act or any of the regulations. However, the FSA has stated that any offering of securities is always deemed public if it is directed at more than 100 investors. If the targeted investor group is smaller and pre-determined an offer may be regarded as non-public. Generally, therefore, a prospectus does not need to be published if the target investor group consists of 100 investors or less.
The FSA may approve the listing particulars in a language other than Finnish or Swedish, if that other language fits the needs of the targeted investors and if the document corresponds with the Finnish requirements. If the securities are offered in Finland to a maximum of 100 professional investors and those investors are deemed sufficiently proficient in, for example, English, then the prospectus or listing particulars may be distributed in English only, and need not be translated to Finnish or Swedish. The distinction between professional and non-professional investors is not prescribed in the legislation.
The FSA is likely to require that the foreign listing particulars be supplemented with specific information about the Finnish market including:
- transfer of payments;
- disclosure of investor information in Finland and rights; and
- obligations attached to the security.
Financial information given in accordance with the international accounting standards (IAS) need not be reconciled with the Finnish generally acceptable accounting proceedures (GAAP).
Continuous Disclosure Obligation
Under the Finnish Companies Act the following must be filed with the trade register and copies can be obtained from there:
- information concerning management and directors;
- annual financial statements; and
- balance sheets of a Finnish limited liability company.
The ministry of finance has also issued a regulation that applies to publicly traded companies about the contents and disclosure items of the annual reports.
In addition, the act and subsequent regulations set out rules on the continuous disclosure obligation of publicly traded companies. Such companies must publish and file quarterly reports, which need not be audited. Every company that has issued securities subject to public trading must, moreover, disclose all decisions and matters that may have a material impact on the value of these securities. Corporate decisions should be disclosed only when they are final and so pending decisions should not be disclosed as they are inside information. Any revisions or further incidents relevant to the published information must also be disclosed and released immediately.
Shareholders of a Finnish limited liability company are deemed to be registered if they have submitted their ownership information to a record maintained by the company. This registration is necessary if an owner wants to cast a vote in shareholders' meetings. If company shares are in book-entry form - as they must be if shares are publicly traded - registration of ownership is automatic and public. A foreign shareholder may, however, choose to record the ownership in non-public form ('nominee registration').
Any shareholder in a Finnish company that is subject to public trading in Finland, or elsewhere in the European Economic Area, must file a notification of beneficial ownership both to the FSA and to the company itself if the ownership either exceeds or falls below the thresholds of 5%, 10%, 15%, 20%, 25%, a third, a half or two thirds of the voting rights or the share capital of the company in question.
In addition, if a beneficial shareholder acquires more than two thirds of the voting rights in a company that is publicly traded in Finland it must offer to redeem all the remaining shares for a fair market price, to be determined in accordance with the provisions of the act and other regulations. This redemption procedure also involves a filing and publication of a bid document. The FSA reviews this document and approves it if the legal requirements are met. Again, the FSA makes no judgment on the quality of the bid but does require that there is sufficient disclosure for an investor to judge its fairness.
Stock exchanges, securities depositories, credit institutions and investment firms and publicly traded companies are also obliged to maintain registers of insider holdings. Abuse of inside information is punishable by the Finnish Criminal Act.
For further information on this topic please contact Ari-Pekka Saanio at Borenius & Kemppinen by telephone (+358 9 615 333) or by fax (+358 9 61 53 34 99) or by e-mail ([email protected]).
The materials contained on this web site are for general information purposes only and are subject to the disclaimer.