In this article we summarise news in the field of Capital Markets that listed companies should be aware of.
ESMA updates Q&As on the EU Prospectus Regulation
The European Securities and Markets Authority (ESMA) has published guidance on the EU Prospectus Regulation in the form of Q&As. The publication deals with a number of interesting issues, not least questions about whether published preliminary information or unrevised information can be deemed to be a profit forecast, and the threshold for prospectus exemptions to be applied to issues in several EU countries.
The reply that is probably most important from a Swedish perspective is ESMA's reply to question Q14.15, which deals with the issue of which companies may apply the simplified form of prospectus in "secondary issues". According to ESMA's reply, companies who have been listed on an SME Growth Market for at least 18 months can apply this simplified form of prospectus.
However, ESMA's reply to question Q14.15 raises a further question as to what applies to issuers who have been listed for at least 18 months on Spotlight Stock Market – a market that only received its status as an SME Growth Market in September 2020. Although ESMA's reply to question Q14.15 in principle means that such issuers can also apply the simplified form of prospectus to secondary issues, there is reason to be cautious. This is because ESMA's reply is reserved for MTFs that have adhered to certain general requirements of Article 78.2 of the Commission Delegated Regulation (EU) 2017/565 during the above 18-month period. Issuers wishing to apply the simplified form of prospectus should thus first ensure that these requirements have been met.
Information on the existence of insider information deemed to constitute insider information
A Swedish bank was convicted by Stockholm District Court (Judgment B 18063-20) of committing the crime of insider trading. The bank was consequently ordered to pay a penalty charge of SEK 35m.
The background to the penalty charge imposed was that a CEO of a listed company was a customer of the bank in question and had pledged their securities account as collateral for a loan. Under the credit terms and conditions for the loan the value of the securities held in the securities account had to exceed a certain level at any given time, otherwise the bank would be subject to a forced sale of these securities. In the account there was a shareholding that the CEO held in the listed company of which he was the CEO.
As a result of the value of the shares in the account later falling below the prescribed level, the bank initiated a forced sale of the shares concerned, which the CEO was notified of. After the sale had commenced the bank received an email from the listed company containing the following information:
"[X], [CEO] is from now on entered in the company's transparency register and cannot sell as of 13:33"
Despite this email the bank did not suspend the forced sale of shares in the listed company. The question that arose, and that the district court had to examine, was whether the information received by the bank in the above email constituted insider information. The bank asserted that information that a person had been entered in the insider list could never on its own constitute insider information, and that such an approach would have unreasonable consequences in that new insider information concerning the issuer would emerge every time the issuer put someone on the insider list.
However, the district court did not go along with the bank’s line of argumentation, instead considering the differences between negative and positive insider information that can be deemed to follow from MAR. According to MAR someone with knowledge of negative insider information should be prevented from selling shares, while someone with knowledge of positive insider information is still allowed to carry out such a transaction (a so-called transaction against the current of insider information). Against this backdrop the district court concluded not only that the bank had been aware of the existence of insider information within the listed company but also that it had been aware that the information was negative. The district court consequently deemed that the information that the CEO had been entered in the insider list could be considered to constitute insider information.
Listed bidders’ breaches of takeover rules – the takeover rules’ sanction provisions took precedence
In Decision 2021:05, Nasdaq Stockholm’s disciplinary board decided that the sanction provisions in the takeover regulations should take precedence over those in the issuer regulations when a listed bidder violates both the takeover rules and the obligation to comply with MAR. In the present case a listed bidder had violated both of these regulatory frameworks by mistakenly only publicising a bid press release by publicising a link to the bid press release in a press release. The disciplinary board’s decision was based on the fact that the takeover rules state that the Stock Exchange’s disciplinary board shall decide on a penalty charge in accordance with those rules, not in accordance with the issuer rules, when a bidder is subject to both regulatory frameworks.
New listing process for Nasdaq Stockholm – greater freedom regarding the appointment of stock-exchange auditors
Nasdaq Stockholm has adjusted its listing process regarding the appointment of stock-exchange auditors in conjunction with an IPO. In a Q&A of 20 September 2021 Nasdaq clarifies that a company wishing to trade its shares on Nasdaq Stockholm must now itself appoint the auditing firm that will assist the company as an exchange auditor during the listing process. Furthermore, the company and its advisors are also free to decide when an auditor should be contacted. These changes only apply to Nasdaq Stockholm and not to the other marketplaces operated by Nasdaq.
As well as the above change, companies will now also be able to book two to three meetings with Nasdaq’s “Listing Qualification” team. During these meetings the company will be able to discuss any questions about the listing requirements and the ongoing review process.
These changes are based partly on general and continuing work on evaluating the listing process and partly on an ambition to achieve increased transparency and predictability regarding the process as a whole, as well as greater flexibility as to when and with whom the company wishes to start the review process.
However, these increased freedoms come with certain limitations. Only auditing firms in "the Big 5" (i.e. EY, KPMG, Deloitte, PwC and Grant Thornton) may be appointed as exchange auditors. This selection of auditing firms is based on the fact that the auditors must have a certain degree of expertise and experience in order to act as exchange auditors. For their part, the auditing firms are free to choose the auditors within the auditing firm whom they want to appoint as exchange auditors.
In accordance with the Q&As described above, however, these changes do not entail any changes regarding the information that the company must submit to Nasdaq through its exchange auditor. Neither will the decision-making process regarding the company’s IPO application change.
Do you want to know more about this topic, or did the article raise other questions? Please feel free to contact one of us or your regular contact at Lindahl.