Securities regulation

 

1. The Danish securities market

 

The infrastructure of the Danish securities market consists of operators of regulated markets, including the OMX Nordic Exchange Copenhagen (the "OMX Nordic Exchange Copenhagen") and multilateral trade facilities, e.g. alternative marketplaces, as well as clearing centrals and securities centres.

 

The OMX Nordic Exchange Copenhagen is the Danish centre for trade of listed securities such as stock, bonds, notes, derivates and money market instruments. The OMX Nordic Exchange Copenhagen is a part of OMX Nordic Exchange, which consists of two divisions; OMX Exchanges, which operates seven stock exchanges in the Nordic and Baltic countries (including the OMX Nordic Exchange Copenhagen) and OMX Technology, which develops and markets systems for financial transactions that are used by the OMX Exchanges and other stock exchanges.

 

All trading of securities listed at the OMX Nordic Exchange Copenhagen is carried out electronically and registered with the VP Securities Services (Værdipapircentralen) ("VP"). VP is responsible for the electronic issue of securities, book-entering of ownership and rights, clearing and settlement of transactions as well as other related services. VP is linked to the international securities centres Euroclear and Clearstream.

 

The corporate entities which have access to trade on the OMX Nordic Exchange Copenhagen are banks and other credit institutions, including the National Bank of Denmark, mortgage credit institutions, stockbroker companies, as well as Danish and foreign investment companies. To obtain such access the relevant entity must apply for an authorisation to perform securities trading. If the entity is a Danish or non-EU/EEA entity, the application must be filed with the Danish FSA. If, on the other hand, the entity is a member of the EU/EEA, the relevant authority is the financial supervisory authority of the domicile country.

 

2. The trading system

 

The OMX Nordic Exchange Copenhagen utilizes SAXESS, an order-driven trading system. Bids and offers are matched automatically and generates trade when the share price, amount of shares and order conditions correspond. If an order involves significantly large trading portions, a transaction may be initiated by telephone and must subsequently be typed in manually into the system. SAXESS is continually informing the market of any changes by publishing and displaying order books, market overviews, closed deals, index information and different reports. Most of the trading takes places at the market for trading entries and orders.

 

In Denmark, the SAXESS system for trading in shares is open on business days from 9:00 to 17:00 CET. Prior to the opening of continuous trading and opening sessions takes place where the dealers may place their limit-orders. The order book is not displayed during this session. The trading day begins and ends with an auction in order to identify the price level for each share. Most of the shares are traded during these auctions. Further, at the end of each trading a closing auction takes place. The closing auction marks the official closing time of the OMX Nordic Exchange Copenhagen. All shares are given closing times simultaneously and are subsequently closed in the same order as when the OMX Nordic Exchange Copenhagen opened the same morning.

 

Two parties may trade outside the OMX Nordic Exchange Copenhagen when they agree on the terms of the trade by phone. In this case, the securities dealer must report the trading to SAXESS within five minutes during the trading day or no later than 15 minutes prior to the beginning of the next trading day, if the transaction took place after close of a trading day. The same rule applies to internal cross deals. The trading regulation sets forth guidelines on when a transaction may take place within the actual spread or price range.

 

3. Admission to listing on the OMX Nordic Exchange Copenhagen

 

The terms and conditions for listing on the OMX Nordic Exchange Copenhagen are set forth in the Danish Securities Trading Act (Værdipapirhandelsloven) and regulations covering specific subjects relating to the issuance of public listed securities. Furthermore, the OMX Nordic Exchange Copenhagen have issued a set of Rules Governing Securities Listing on the OMX Nordic Exchange Copenhagen which lay down supplementary provisions on admission to listing, prospectuses and disclosure requirements for shares, unit trust certificates and bonds, respectively.

 

Shares can be admitted to listing on the OMX Nordic Exchange Copenhagen on application from the issuer to the Danish FSA if the statutory requirements are met and the Danish FSA is of the opinion that trading and listing of the shares are in the interest of the investors. It is a general requirement that the shares shall be negotiable securities and that no limitations shall be made in this regard. Furthermore, the expected market value of the shares must amount to at least EUR 1,000,000. If the expected market value of the shares cannot be assessed, the company’s equity capital, including the result from the most recent financial year, must amount to at least EUR 1,000,000 in order for the shares to be eligible for listing. In terms of distribution the main rule is that not less than 25% of the listed classes of shares subscribed for must be offered to the public.

 

Foreign companies are subject to special conditions with respect to listing. In general, such companies shall meet the above terms and conditions and any specific rules which might apply to the relevant situation. It is, however, a prerequisite that a foreign company undertakes its business activities in compliance with national law.

 

4. Prospectus requirements

 

The Danish provisions implementing the EU Prospectus Directive (2003/71/EC) on prospectuses entered into force in 2005. When a company offers securities in Denmark, the question of whether a prospectus is required is determined by the value of the securities offered. With respect to threshold values in the provisions on prospectuses, the EU Prospectus Directive states that there must be uniform rules for prospectuses for public offers of securities exceeding EUR 2.5 million (market value) and for prospectuses for admitting securities for listing or trading on regulated markets. Where an offer of securities with a total consideration of less than EUR 100,000 is made to the public, the obligation to publish a prospectus shall not apply. For public offers of securities in the range of EUR 100,000 to 2.5 million, member states may lay down their own rules concerning the obligation to publish a prospectus. The Danish FSA has chosen to issue two separate executive orders on prospectuses; one covering public offerings exceeding EUR 2.5 million (Executive Order No. 1232 of 22 October 2007) and the other covering offerings within the range of EUR 100,000 to 2.5 million (Executive Order No. 1231 of 22 October 2007). As regards the first public offering exceeding EUR 2.5 million, such offering has to be accompanied by a complete prospectus. The rules regarding this type of prospectus is set forth in chapter 6 of the Danish Securities Trading Act. With respect to the first offering within the range of EUR 100,000 to 2.5 million, such offering must generally also be accompanied by a prospectus. In this event the prospectus requirements, which are set forth in chapter 12 of the Danish Securities Trading Act, will be less restrictive. The executive orders contain several exemptions to the prospectus requirements described above and information on content requirements and filing authorities.

 

5. Disclosure rules and inside information

 

Issuers of listed securities are generally subject to strict reporting requirements. Any material non-public information which a prudent investor would reasonably use as part of its investment decisions must be disclosed to the market and the OMX Nordic Exchange Copenhagen as soon as possible. The issuer must ensure that the publishing of the information is made in a way that gives the public quick and easy access to the information and that the published information is sufficient enough for the investors to conduct a complete, correct and timely assessment of the relevant information.

 

The EU Market Abuse Directive (2003/6/EC) has been implemented into Danish law by inserting new provisions in the Danish Securities Act. Pursuant to section 27 of the Act, an issuer of securities which are listed on a stock exchange, an authorized market place, a regulated market or an alternative marketplace has a duty to inform the public as soon as possible of inside information which directly concern the issuer’s business. The issuer is obliged to publish such information promptly upon the coming into existence of a set of circumstances or the occurrence of an event, albeit not yet formalized. Inside information is defined as specific non-public information regarding issuers, securities or market conditions with respect to such securities which is expected to have a significant impact on the share price if published, cf. section 34(2) of the Danish Securities Trading Act. An issuer may, however, under his own responsibility delay the public disclosure of inside information such as not to prejudice his legitimate interests provided that such omission would not be likely to mislead the public and provided that the issuer is able to ensure the confidentiality of that information.

 

The statutory provisions on disclosure of inside information is supplemented by an Executive Order on Disclosure Duties for Issuers, which regulates specific areas such as the form of disclosure and the relevant media, disclosure of major shareholdings, periodic reporting etc.

 

Anyone holding shares in a company that is being listed on the OMX Nordic Exchange Copenhagen must notify the Danish FSA and the company on the day of trading, if the portfolio of shares is at least 5% of the company’s voting rights or share capital. This requirement also includes shares owned by third parties if the shareholder holds voting rights by agreement or pledge. The shareholder must notify of any changes in the shareholding above or below 10, 15, 20, 25, 50 and 90%, as well as one-third and two-thirds of share capital, on the day of trading (or in certain instances up to two trading days after the sale or acquisition). The notice must contain information on the full name and address or principal place of business of the shareholder, the number of shares held and their face value, share classes if any, as well as the calculation basis of the shareholdings. Non-compliance with the information duty is punished by fines.

 

In addition to the statutory disclosure rules, listed companies are obliged to prepare internal rules regarding compliance with the disclosure duties as well as internal rules to ensure that inside information is not selectively disclosed to third parties, cf. the Rules Governing Securities Listing on the OMX Nordic Exchange Copenhagen.

 

In 2007, the EU Transparency Directive (2004/109/EC) and the MiFID Directive (2004/25/EF) was implemented into Danish law by amendments to the Danish Securities Trading Act and the Financial Services Act.

 

6. Takeovers

 

The EU Takeover Directive (2004/25/EC) has been implemented into Danish law by inserting of provisions on mandatory and voluntary takeover bids in sections 31 and 32 of the Danish Securities Trading Act and by issuing and Executive Order on Takeover Bids.

 

7. Compulsory redemption

 

If a shareholder holds more than 9/10 of the total outstanding shares and a proportional part of the voting rights in a listed company, the shareholder and the board of directors of the listed company may jointly decide to let the remaining shareholders be redeemed by the majority shareholder. In such event the remaining shareholders shall receive a request to transfer their shares to the majority shareholders within 4 weeks after the notice. If the parties disagree on the redemption price, the price must be settled by independent experts who are appointed by the court in the jurisdiction where the listed company has its principal place of business. The notice is subject to certain formal requirements.

 

Further, a shareholder that has required more than 9/10 of the total outstanding shares and voting rights in a listed company by a takeover bid set forth under Section 31(1) of the Danish Securities Trading Act, has the right to redeem the remaining outstanding shares owned by minority shareholders without entering into an agreement with the board of directors of the listed company.

 

In addition to the regulation on compulsory redemption, a minority shareholder may require a majority shareholder holding more than 9/10 of the total outstanding share capital and voting rights to redeem the minority shareholder. If the articles of association of the company does not regulate the redemption price and the parties cannot agree on this matter, the redemption price will be settled by independent experts who are appointed by the court in the jurisdiction where the listed company has its principal place of business.

 

8. Alternative marketplaces – First North

 

In 2005 the OMX Nordic Exchange Copenhagen introduced an alternative marketplace under the label "First North". First North is targeted at small and mid-size growth companies looking to raise working capital on the Northern European capital market. First North combines the benefits of being on-market with simplicity and lower costs as the regulations are lighter. First North is a part of the OMX Nordic Exchange which implies that the companies admitted to trading at First North are given the same possibilities as large companies, but on a smaller platform.

 

Issuers of securities which are admitted to trade on First North are subject to the rules and regulations set forth in the First North Nordic Rulebook, which is a common code of practice for all national marketplaces within the OMX Nordic Exchange.

 

The terms and conditions for admission to First North are set forth in the First North Nordic Rulebook. The general conditions for admitting securities to listing on First North are that trading of the securities is of public interest, meaning that the number of shareholders must be large enough to adequately ensure a proper distribution and minimum 10% of the shares must be held by the public. All shares within a class of shares must be admitted to trade, registered electronically by VP and negotiable. The company must provide First North with a company description, which replaces the prospectus requirement. Further, the company must engage a certified adviser to assist the company in complying with the relevant rules and regulations, as well during the application process as subsequently when the securities have been admitted to trading at First North. The company must prepare internal rules on trading in its own shares, including trading by the board of directors, management and employees. Finally, the company must have the necessary organization and sufficient staff in order to comply with disclosure rules etc.