The Finnish Securities Market legislation has been reformed in its entirety at the beginning of 2013. As a result, several related laws and decrees, including the new Securities Markets Act (746/2012), came into effect on 1st of January 2013. The underlying idea of the reform was to improve the clarity and comprehensibility of the Securities Market legislation and also fulfill the requirements of EU law. In connection with the reform, the rules regulating the obligation to disclose holdings were also changed.
The disclosure obligation is regulated in Chapter 9 of the new Securities Markets Act. The obligation is intended to make certain that shareholders have sufficient knowledge of the ownership structure and division of control of listed companies and of any changes thereto. A shareholder is obligated to notify both the Finnish Financial Supervisory Authority and the relevant listed company of changes in its holdings and voting rights. The listed company is then required to publicly disclose the shareholder's notification. These obligations are provided for in the law because of the material impact that the information may have on the value of the listed company's shares.
A new 90 per cent disclosure obligation threshold was included in the new Securities Markets Act. Now changes in holdings must be disclosed when the holding reaches, exceeds or falls below 5, 10, 15, 20, 25, 30, 50 or 90 per cent or two thirds of the voting rights or the numbers of shares of the target company.
A shareholder's holding and voting rights include the shareholder's holdings, the holdings of shareholder controlled corporations or foundations, and the holdings of pension funds in which the shareholder or shareholder controlled corporations have an ownership share.
In addition, a shareholder or a person comparable to a shareholder who is a party to an agreement or other arrangement which, if executed, would cause the proportion of voting rights or share capital to reach, exceed or fall below the aforementioned disclosure thresholds, is under obligation to make a notification.
The notification of changes in holdings may be made by a shareholder or a person controlling a shareholder. A shareholder need not submit the disclosure notification if the disclosure is made by the organization or foundation exercising control over it. The notification must include the details set out in the relevant Ministry of Finance decree 1021/2012. This information includes inter alia:
- the full name of the target company;
- the grounds for filing the flagging notification;
- the date when the portion of the total number of shares and voting rights reached, exceeded or fell below the threshold;
- the exact portion of the number of shares and the voting rights under control (both direct and indirect) unless the portion falls under the five per cent threshold;
- the full name of the shareholder or comparable persons as well as their business identity codes or similar registration numbers;
- the full name of shareholder controlled corporations or foundations and their business identity codes or other similar registration numbers and the grounds for their inclusion in the holding and voting rights of the shareholder;
- an explanation of how the holding and voting rights of the shareholder, comparable person, or shareholder controlled corporations or foundations are spread amongst these persons;
- the judicial structure and other grounds by virtue of which the shareholder controlled corporation or foundation is under the control of the shareholder; and
- in case a shareholder or a person comparable to a shareholder is a party to an agreement or other arrangement which, if executed, would cause the proportion of voting rights or share capital to reach, exceed or fall below the aforementioned disclosure thresholds, then the substantive content, the parties and the validity of the agreement or other arrangement shall be disclosed in the notification.
The disclosure notification shall be written in Finnish or Swedish or in a language commonly used in international financial markets. Thus, a shareholder's disclosure notification can be written also in English.
The Securities Markets Act contains a new notification deadline for a shareholder's disclosure. According to that rule, a disclosure notification shall be submitted without undue delay, however, at the latest on the trading day following the day when the shareholder becomes aware of a threshold having been crossed or of an agreement or other arrangement which may lead to crossing of a threshold. A shareholder is considered to have received this information about a legal act at the latest two days after the legal act has taken place.
Credit institutions, providers of investment services, management companies and market makers have, under certain conditions, the possibility to be granted exemption from the flagging obligation.
A target company must disclose without undue delay any notifications it receives. In general, the target company shall publish the information at the latest on the trading day following the day when the target company received the notification (however, prior to the commencement of the public trading on the next day).
If a shareholder's notification is incomplete, the target company may supply the missing data, provided that doing so does not cause unreasonable delay or inconvenience. The target company must indicate what information it has provided. As a rule, the target company shall publish the information in Finnish or Swedish.
An administrative fine will be imposed if one or more of the disclosure obligations have been breached. In connection with the reform, the range of administrative fines was increased tenfold. The administrative fine for legal persons is currently EUR 5,000 – 100,000 (previously EUR 500 – 10,000) and for natural persons it is EUR 500 – 10,000 (previously EUR 50 – 1,000).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.