A person who is a member of the board of directors or management of a listed company, or who is associated with the company in some other way, and who is therefore subject to certain requirements in respect of trading and reporting trades carried out, cf. Sections 4-2 and 3-6 of the Securities Trading Act. Each listed company is responsible for identifying its primary insiders, and is responsible for providing an up-to-date list of its primary insiders to Oslo Børs. Each primary insider is personally responsible for ensuring that the requirements imposed on him or her by the Securities Trading Act are adhered to.
When a primary insider buys, sells, exchanges or subscribes for financial instruments issued by the company in which he or she is the primary insider or by a company in the same group, this is deemed to be insider trading and is regulated by the Securities Trading Act.
Unlawful insider trading
Trading in financial instruments on the basis of inside information (precise information likely to have a significant effect on the price that is not publicly available or commonly known in the market) is unlawful. This applies regardless of whether it is carried out wilfully (with intent) or through negligence (by failing to adhere to the duty of care required).
The duties of a primary insider
All primary insiders are required to notify Oslo Børs of any transaction they carry out in financial instruments issued by the company in which they are a primary insider no later than the start of trading on the following day. This applies to transactions in all such instruments, i.e. shares, equity certificates, warrants, convertible bonds, subscription rights, warrants, options etc. The notification requirement also applies to transactions carried out by a primary insider's close associates, which includes his or her spouse or a partner with whom they co-habit in a relationship akin to marriage, as well as their under-age children. The detailed definition of close associates can be found at Section 1-4 of the Securities Trading Act.
Content of the notification
The information that must be included when notifying a trade is governed by Section 4-4 of the Securities Trading Act. Please see the text of the Act for full details. Notifications should be sent to Oslo Børs either by e-mail to: firstname.lastname@example.org or by fax to: +47 22 41 65 90. A
Insider trading - an important signal to the market
Members of the Board and management of a company, together with other employees and people outside the company that fall within the definition of primary insiders, typically have greater knowledge of what is happening in a company and are therefore in many cases better able to evaluate the future direction of the company's share price. Transactions carried out by such primary insiders therefore represent important information for the market and for investors’ decisions about the company's shares. This is the rationale for the notification requirement for primary insiders.
Consequences of breaching the notification requirement
A primary insider has not discharged his or her duty until notification has been sent to Oslo Børs and has been published, and the duty is not discharged if the primary insider fails to submit notification prior to the start of stock exchange trading on the next business day.
All trades carried out by primary insiders and their close associates are checked to see that they comply with the notification rules in the Securities Trading Act. This includes daily reconciliation of movements on primary insiders’ VPS accounts with the information held on the Oslo Børs insider register. This checking identifies any inconsistencies in reporting, or any failure to report, this important information to the market.
Any notifications due to be received that contain errors or omissions, or that are received late or not at all, are routinely referred by Oslo Børs to Finanstilsynet (the Financial Supervisory Authority of Norway). Finanstilsynet carries out further investigations into the cases referred, and decides whether to refer individual cases to the police authorities.
Insider trading versus unlawful insider trading
It is important to differentiate between insider trading and unlawful insider trading.
Insider trading carried out in accordance with the rules and regulations is of course legitimate, and represents an important source of information for the market. If a primary insider purchases shares in a company, the market often interprets this as a signal that the individual has confidence in the company and its activities. In the same way, the market will often draw an adverse conclusion if primary insiders sell shares. It is therefore important to have clear rules for reporting insider trading, as is the case in the Norwegian market. Primary insiders are required to maintain high standards in meeting their duties so that their trading remains in the insider trading category and does not fall into the category of unlawful insider trading.
Unlawful insider trading takes place when a primary insider or an employee, an adviser to the company or anyone else trades on the basis of inside information that is likely to have a significant effect on the price but is not publicly available or commonly known in the market.
Is the incidence of unlawful insider trading higher in the Norwegian market than elsewhere?
There are no statistics or empirical evidence to suggest that the incidence of unlawful insider trading is more widespread in Norway than in other countries. In Norway, we have relatively strict regulations on trading by primary insiders. Less attention has been paid to the question of insider trading in some other European markets, and the regulations in these markets have not been at all as strict as in Norway. However, over recent years the EU has acted to tighten these rules, partly by harmonising the regulations for securities trading across national frontiers. These changes, which came into effect in Norwegian legislation in September 2005, are having a positive effect on securities trading throughout Europe.
Managing inside information
There used to be a problem in the Norwegian market with companies failing to take sufficient care in managing inside information so that information sometimes leaked out to the market from a company or its advisers. It seems fair to say that this was a bigger problem than unlawful insider trading. However, over recent years Norwegian companies and other participants in the market have become much more professional in this and other areas, and are now much more aware of the whole issue of inside information. Oslo Børs has focused on supervision and control issues for many years in order to build confidence in the Norwegian market. These efforts have produced results, and in terms of information leaks there can be no doubt that listed companies are much more aware and professional in their management of inside information than was the case in the 1990s.
Companies are responsible for ensuring that inside information does not fall into the hands of unauthorised parties prior to its publication, and are also required to maintain lists of who is authorised to access inside information and ensure that these individuals are aware of the duties and responsibilities involved. Companies may be required at any time to provide the current list to Oslo Børs or Finanstilsynet.
More people prosecuted for unlawful insider trading
It can often be difficult to prove that unlawful insider trading has taken place. In many of the cases considered, the authorities find the circumstances suspicious even though there is no concrete proof. Oslo Børs and Finanstilsynet have developed guidelines for their collaboration on surveillance and investigation. These guidelines include a standard procedure for Oslo Børs to report to Finanstilsynet all cases where it suspects a breach of the Securities Trading Act (for example abuse of inside information) that cannot be eliminated by a preliminary investigation. Cases are therefore routinely reported to Finanstilsynet if they fail a low threshold of suspicion. Finanstilsynet has a wider supervisory mandate than Oslo Børs, and is therefore able to investigate individual cases in greater depth. Finanstilsynet can refer cases to ØKOKRIM (the National Authority for Investigation and Prosecution of Economic and Environmental Crime), which then decides whether to instigate a criminal prosecution.
More people have been found guilty of unlawful insider trading and/or aiding and abetting such offences over recent years, and this has had a marked preventative effect. There can be no doubt that successful prosecutions have helped to discourage people from the temptation to break the law.
Can Oslo Børs prevent unlawful insider trading?
Oslo Børs has a number of tools at its disposal to intervene in trading if it detects abnormal trading behaviour and so prevent unlawful insider trading and limit the damage caused by what may be unlawful activity. This includes temporary halts to price matching in a security (a matching halt), suspending a security from trading, etc. Oslo Børs uses a sophisticated surveillance system to identify situations that require intervention. The use of matching halts etc. in such situations provides participants in the market with a degree of reassurance that trading is stopped if there are signs of unfair trading or undesirable trading activity. In this way Oslo Børs limits the impact of possibly unlawful activity.
The provisions in this chapter apply to shares admitted to trading on a regulated market in an issuer with Norway as its home state. Norway is to be considered home state for issuers as set out in section 5-4 second to fourth paragraph. Where Norway is considered host state to an issuer, the home states legislation applies.