The Proposal from Oslo Exchanges
Public Hearing
Possible Implementation
In a letter dated December 21 2000 the Oslo Exchanges proposed lowering the threshold for the disclosure of acquisitions of large shareholdings in listed, publicly traded companies from 10% to 5%. The proposal has been submitted to a public inquiry without attracting serious objections and is likely to be passed later this year or in early 2002.
Under Section 3.2 of the 1997 Norwegian Securities Trading Act an acquirer of shares in a company listed on a Norwegian stock exchange must disclose his ownership to the stock exchange where an acquisition of shares causes the acquirer's aggregate holding of shares and/or rights (including options) to reach or exceed one-tenth, one-fifth, one-third, one-half, two-thirds or nine-tenths of the share capital, or of shares representing an equivalent proportion of the voting rights.
This rule applies correspondingly to anyone who changes his holdings of the share capital or votes (or rights thereto) through disposal so that the proportion is reduced to, or falls below, the specified thresholds.
The disclosure must be made "immediately" after the thresholds have been reached or are no longer met. The term 'immediately' has been very strictly interpreted and enforced, and the disclosure should be made as soon as possible after the requirement has been triggered. It will not be sufficient (as in other countries) to wait until the opening of the next trading day. As soon as Oslo Exchanges receives the disclosure it is made public through its information system.
The Proposal from Oslo Exchanges
In a letter dated December 21 2000 Oslo Exchanges (which is currently the only stock exchange in Norway) proposed amending the thresholds for disclosure under Section 3.2. It proposed introducing a new and lower threshold of 5% in addition to the existing thresholds. All of the remaining rules regarding disclosure, such as when disclosure shall be made and the content of the disclosure, will be left unchanged until future regulation within the Norex Alliance is presented. The Norex Alliance is a cooperation between Oslo Exchanges, the Stockholm Stock Exchange, the Copenhagen Stock Exchange and the Iceland Stock Exchange. The goal of the Norex Alliance is to establish a combined Nordic, transparent and liquid marketplace for securities.
The main reasons behind the proposal from Oslo Exchanges to lower the threshold to 5% are the following:
- A lower threshold will increase the transparency of the market and give all investors equal information about the identity and ownership of major shareholders. Such information may be price sensitive since acquisitions of major shareholdings of more than 5% may indicate a strategic interest in the company. Today, major shareholdings may be kept secret from the public through the use of nominee accounts. This has been clearly illustrated lately in Norway, where a 9% shareholder in Orkla ASA, a large Norwegian conglomerate, was officially unknown from Summer 2000 until the shares were sold in late August 2001;
- Ensuring the same level of information between the market players may contribute to increased trust in both the companies and the marketplace itself; and
- A reduced threshold will bring the Norwegian regulations in line with those of other European countries. Except for Luxembourg, Norway is the only country within the European Economic Area with a higher initial threshold for disclosure than 5%. By choosing 5% as the new minimum threshold Oslo Exchanges will also have the same rules as the other parties in the Norex Alliance.
The proposal from Oslo Exchanges was submitted to a public inquiry in February 2001. Most of the respondents agreed with the proposal, although some also pointed out that other parts of the disclosure rules should be considered if the thresholds are amended. For instance, the Association of Norwegian Stockbroking Companies stated that in addition to introducing a new threshold of 5%, the rules regarding consolidation of ownership and time limits for the disclosure to be made should be amended.
The proposal from Oslo Exchanges, together with the comments from the respondents, is now under consideration by the Ministry of Finance. The ministry has stated that it will issue a recommendation and, if relevant, a proposal for changes to the disclosure rules together with a proposal for a new Registry of Securities Act. The ministry's proposal should have been released during Spring 2001 but is now expected to be released in late Autumn 2001. As most of the bodies entitled to comment upon the proposal were positive it is likely that the Ministry of Finance will adopt the proposal to introduce a new threshold of 5%. However, it is unclear when the proposal will be adopted and, if adopted and resolved by the Norwegian Parliament, from what time the new threshold will come into force. Until such time, the existing thresholds where an investor is not obliged to disclose his shareholdings before it reaches 10% will continue to apply.
For further information on this topic please contact Joachim Bjerke or Rolf Johan Ringdal at Bugge, Arentz-Hansen & Rasmussen by telephone (+47 22 83 02 70) or by fax (+47 22 83 07 95) or by e-mail ([email protected] or [email protected]).
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