Insider supervision

The functioning of securities markets requires that investors have confidence in the markets and parties operating in such markets. Abuse of insider information erodes this confidence. We seek to both prevent these abuses and investigate them ex post.

The aim of actual insider investigation is to find out whether insider information has been abused in securities trading and, if so, who are guilty of such action. As well as clear suspected cases, also other incidents are usually taken up for investigation. These include large-scale projects for corporate acquisitions, which can be assumed to involve significant insider information and a wide range of insiders.

Suspected cases of abuse of insider information are investigated

We continuously monitor trading in the securities markets and current events in the markets.

Investigation of a suspected case of abuse of insider information usually commences from the publication of a stock exchange announcement on the part of a company. Developments in the company’s share price may have changed considerably prior to the publication of the announcement or the trading volumes in the company’s share may have been on a clearly rising trend. We also receive tips regarding suspected cases from the stock exchange, market participants, the media, private investors and foreign supervisory authorities. Our investigatory work is assisted by a control system which, for instance, enables the conduct of analyses of potential deviations and the identification of brokers participating in trading.

Our insider investigation seeks to identify the sources and the extent of potential dissemination of insider information. We request the company to submit information on all those persons who have been involved in handling a matter falling within insider information criteria (project-specific insider registers) and on the point in time when these insiders have become aware of the matter.

The main challenge to the investigative procedure lies in obtaining adequate proof of a link between an insider and a person who has traded in the company’s share, unless the insider is the person concerned. If this link can be established, it is possible that the prohibition against abuse of insider information has been violated.

FIN-FSA has statutory right to obtain information on deals

FIN-FSA has the statutory right to obtain information on persons who have issued orders for deals. Brokers must submit this information upon request. If necessary, we may turn to foreign supervisory authorities for obtaining information on nominee-registered foreign owners.

The duration of an insider investigation is determined by trading activity, the scope of investigation and the time needed to obtain information on parties to trades. Based on the results of our investigation, we evaluate whether there is reason to suspect that the prohibition against abuse of insider information has been violated. If suspicions are confirmed, we will request a police investigation.

Supervision by the stock exchange

The Helsinki Stock Exchange has issued insider guidelines in the form of recommendations, which become binding on a company as soon as it has decided to introduce the guidelines. The stock exchange monitors compliance with the guidelines. It also gives recommendations for interpretation of the guidelines.

 

 

 

26 May 2009

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