Securities market conduct
Published: 21 March 2023
The general market conduct rules and compliance monitoring shall promote investor protection and ensure effective allocation and pricing of capital. The rules on unlawful insider dealing, market manipulation and due care in handling inside information are of key importance. Finanstilsynet also oversees compliance with the rules on the preparation of insider lists, the duty to investigate, the prohibition of unreasonable business methods, the notification requirement for primary insiders and rules requiring the disclosure of large shareholdings.
Supervision, monitoring and control
In its supervision of market conduct, Finanstilsynet cooperates with the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime (Økokrim) and Oslo Børs.
The majority of cases investigated by Finanstilsynet in 2022 were reported by investment firms, foreign authorities and investors. Many cases were referred by Oslo Børs or initiated by Finanstilsynet itself in response to market events. Finanstilsynet’s own surveillance systems triggered a large number of alarms that led to further investigation.
Cases of insider dealing and market manipulation are often time-consuming, above all where the investigation requires identification of foreign investors’ trading ahead of particular market events. This is contingent on extensive contact with foreign fund managers and supervisory authorities.
In 2022, Finanstilsynet investigated the following cases:
- 160 cases of possible unlawful insider dealing and/or breaches of confidentiality or the obligation to maintain insider lists
- 158 cases of possible market manipulation / unreasonable business methods
- 29 cases on disclosure of large shareholdings
- 43 cases on the notification requirement for primary insiders
- 8 cases on short positions requiring notification
- 97 other notifications of various kinds from private individuals
Finanstilsynet received a total of 163 reports from investment firms and marketplaces under an obligation to report transactions giving rise to suspicion of insider dealing or market manipulation. In addition, Finanstilsynet received 60 reports from foreign supervisory authorities on insider dealing or market manipulation.
In 2022, Finanstilsynet imposed six administrative fines for violation of the disclosure requirement for large shareholdings and two administrative fines for violation of the notification requirement for primary insiders etc. Finanstilsynet also imposed three administrative fines for violation of the Short Selling Regulation.
Notifications to the prosecuting authority
Finanstilsynet reported three cases of suspected unlawful insider dealing and/or breach of confidentiality to the prosecuting authority in 2022.
Follow-up of reported cases
Finanstilsynet cooperates with Økokrim and local police authorities on reported cases.
In 2022, Finanstilsynet provided assistance to foreign supervisory authorities in a number of cases relating to market conduct and received such assistance in some instances. This is in accordance with obligations under the EEA Agreement and other international agreements.
There is a general prohibition against uncovered short sales. This means that the seller as a rule must have ensured access to the securities so that actual settlement can be effected. This can be done through borrowing or by entering into an agreement ensuring timely delivery. The Short Selling Regulation allows exceptions from the prohibition against uncovered short sales, for example for market makers.
According to the Regulation, investors holding short positions in shares or government debt that exceed set thresholds shall report these to the supervisory authority. Short positions are received and published in Finanstilsynet's Short Sale Register, ssr.finanstilsynet.no. This register has been established in accordance with pan-European regulations on short selling. Net short positions above or equal to 0.5 per cent are publicly available information. Other reported positions are available only to Finanstilsynet and ESMA. Finanstilsynet’s website on short sales contains information that is relevant to many and is frequently visited.
In 2022, 1 434 changes to positions in 57 financial instruments corresponding to or exceeding 0.5 per cent were made public. With respect to positions that are not publicly available, i.e. positions below 0.5 per cent subject to the disclosure requirement, 4 491 positions in 168 instruments were notified to Finanstilsynet. 191 different investors reported positions in 2022.
In 2022, three administrative fines were imposed for violation of the Short Selling Regulation. In addition to the administrative fines, a number of undertakings were also warned of minor violations of the Short Selling Regulation. Finanstilsynet sends statistics of short positions in shares and government debt to the European Securities and Markets Authority (ESMA) on a regular basis.
Pan-European rules on transaction reporting have been implemented in the Norwegian Securities Trading Act. The transaction reporting system (TRS) covers all EEA countries and is designed to receive reports on executed transactions in financial instruments from investment firms and trading venues. Financial instruments are defined as all financial instruments listed on a trading venue in the EEA and derivatives with such listed financial instruments as the underlying (e.g. shares).
The purpose is to give national supervisory authorities a complete overview of the securities transactions carried out in the market. TRS is important for many of the tasks Finanstilsynet is commissioned to carry out, and data from TRS are used, among other things, to uncover market abuse.
In 2022, Finanstilsynet received some 190 million approved transaction reports via TRS. 36 million of these were from investment firms in Norway. In addition to the approved transaction reports, Finanstilsynet received approximately five million transaction reports that had been rejected or deleted. In 2022, 19 per cent of these reports were from Norwegian investment firms, compared with 17 per cent in 2021. Germany is now the largest foreign country reporting transactions, accounting for approximately 31 per cent.
In 2022, Finanstilsynet ordered one undertaking to correct its transaction reporting. The decision is discussed in more detail below under ‘Administrative enforcement’.
Changes to the disclosure requirements
On 1 September 2022, new rules on the disclosure obligation entered into force. The new rules mean that the market must be informed about transactions in large holdings, etc. in listed issuers. The changes are in line with amendments to the EU Transparency Directive. The rules entail a number of important changes, including an obligation to disclose the lending, borrowing, return and receipt of shares. In connection with the entry into force of the new disclosure requirements, Finanstilsynet prepared an updated guidance to the revised requirements. The guidance is available on Finanstilsynet’s website (in Norwegian only).
Market Abuse Regulation
Rules corresponding to the EU’s Market Abuse Regulation (MAR) and supplementary rules laid down in Commission Regulations were implemented in Norwegian law in the Securities Trading Act and the Securities Trading Regulations on 1 March 2021. The market conduct rules previously set out in the Securities Trading Act concerning insider dealing, use of inside information, market manipulation and the notification obligation of primary insiders have been retained in MAR, which also includes a number of changes. The scope of application of the rules has been expanded, and MAR applies in full to financial instruments traded at multilateral trading facilities. For issuers of financial instruments traded on a regulated market, the rules on the notification obligation for primary insiders and close associates have been expanded to apply to issuers of all financial instruments, including bond issuers. In consequence of the implementation of MAR, Finanstilsynet has also been authorised to impose administrative fines in a number of cases, for example in connection with infringement of the rules on market manipulation, unlawful dissemination of inside information and the obligation to keep insider lists.
In 2022, Finanstilsynet devoted considerable resources to explaining its understanding of the regulation and its administrative procedures relating to MAR at seminars and lectures. In addition, inquiries from issuers, primary insiders and advisers were handled on an ongoing basis. In May 2022, Finanstilsynet held a digital seminar aimed at retail issuers on the conduct rules that are relevant to investors, including misuse of inside information, market manipulation and various disclosure obligations.
During the year, Finanstilsynet reviewed compliance with MAR's rules on investment recommendations. The rules impose certain disclosure requirements on anyone who produces or disseminates investment recommendations. Finanstilsynet has focused primarily on recommendations from financial influencers in social media, so-called ‘finfluencers’, aiming to help prevent violations of the regulations through information measures. In January 2022, Finanstilsynet, in cooperation with the Consumer Authority, organised a digital seminar on the rules that apply to finfluencers. Finanstilsynet has also considered a number of cases to clarify whether those who have produced or disseminated investment recommendations have complied with the regulations. These surveys have included both publications from investment firms, which are subject to extensive rules, and private individuals. In some cases, administrative fines have been considered.
In 2022, Finanstilsynet established a system for regular surveillance of the disclosure obligation for primary insiders and persons closely associated with them. The monitoring is based on Oslo Børs' lists of primary insiders and their close associates, which are sent to Finanstilsynet. The surveillance system has triggered a large number of alarms that have led to further investigation.
Transaction reporting – order for corrective measures
For some time, Finanstilsynet has been conducting a thorough investigation of DNB Bank ASA's reporting of transactions in financial instruments in Finanstilsynet's financial transaction reporting system (TRS), reviewing the company’s reporting since 2020. Finanstilsynet found extensive and persistent misreporting of transactions to Finanstilsynet. As a result of the numerous and persistent violations, Finanstilsynet decided on 31 October 2022 to order the company to ensure that its procedures and systems were brought into compliance with the obligations under MiFIR by 1 February 2023. Furthermore, Finanstilsynet instructed the company's board of directors to ask the internal audit unit to assess whether the measures implemented are satisfactory. A copy of the internal audit’s report shall be sent to Finanstilsynet by the same date.
Primary insiders' notification obligation – administrative fines
The implementation of MAR resulted in significant changes in the rules on primary insiders' obligation to notify transactions in financial instruments issued by the relevant issuer. In 2022, Finanstilsynet made two decisions and imposed administrative fines for violation of these rules.
An administrative fine of NOK 150 000 was imposed on one undertaking for infringement of the provision in MAR that persons closely associated with primary insiders shall promptly and no later than three business days after the date of the transaction notify the issuer and Finanstilsynet of transactions conducted on their own account in shares or debt instruments of that issuer.
An administrative fine of NOK 150 000 was imposed on Equinor ASA for infringement of the provision in MAR that the issuer shall ensure that transactions notified to the issuer by a primary insider are made public promptly and no later than three working days after the date of the transaction.
Other supervised sectors:
- Banks and other financing activity
- Insurance and pensions
- Infrastructure in the securities area
- Investment firms
- Mutual funds and collective investment schemes
- Approval of prospectuses – transferable securities
- Financial reporting enforcement – listed companies
- International cooperation
- Money laundering and financing of terrorism
- Digital finance and IT risk