Securities market conduct

Supervision, monitoring and control

Finanstilsynet cooperates closely with the National Authority for Investigation and Prosecution of Economic and Environmental Crime (ØKOKRIM) and Oslo Børs on monitoring compliance with the market conduct rules.

The majority of cases investigated by Finanstilsynet in 2020 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 system, SKADI, triggered many alarms in 2020 that have led to further investigation.

Many cases of insider dealing and market manipulation are time-consuming, above all where the investigation requires identification of foreign investors who have traded ahead of particular market events. This process entails that Finanstilsynet maintains extensive contact with foreign fund managers and supervisory authorities.

In 2020, Finanstilsynet investigated the following cases:

• 92 cases of unlawful insider dealing and/or breaches of confidentiality or the obligation to maintain insider lists
• 61 cases of market manipulation/unreasonable business methods
• 45 cases on disclosure of large shareholdings
• 27 notifications from private individuals
• 42 cases on the notification requirement for primary insiders
• 27 cases on short positions requiring notification

Finanstilsynet received a total of 72 reports from investment firms under obligation to report transactions giving rise to suspicion of insider dealing or market manipulation and 60 reports from foreign supervisory authorities.

Administrative fines

In 2020, Finanstilsynet imposed four administrative fines for violation of the disclosure requirement for large shareholdings and four administrative fines for violation of the notification requirement. Finanstilsynet also imposed two administrative fines for violation of the Short Selling Regulation. Finanstilsynet expects this to have a deterrent effect.

Notifications to the prosecuting authority

Finanstilsynet reported one case of suspected unlawful insider dealing and/or breach of confidentiality to the prosecuting authority in 2020.

Follow-up of reported cases

Finanstilsynet collaborates with ØKOKRIM and local police authorities on reported cases. Finanstilsynet provided assistance to the prosecuting authority in the form of different analyses in 2020.

In 2020, 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 international agreements.

Short Sale Register

Finanstilsynet’s Short Sale Register has been established pursuant to Section 3-14 of the Securities Trading Act, which implements the EU’s Short Selling Regulation (236/2012) in Norwegian law. The register at Finanstilsynet's website has been available for about four years. According to the Regulation, investors holding short positions in shares or government debt that exceed set thresholds shall report these to the supervisory authority. The reception and disclosure of short positions takes place at ssr.finanstilsynet.no. 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.

As a consequence of the Covid-19 crisis and the financial market turmoil, ESMA introduced a lower threshold for net short positions to be reported to the register on 16 March 2020. The previous 0.2 per cent threshold was lowered to 0.1 per cent. In addition, Finanstilsynet must send data on short selling of shares to ESMA on a daily basis. This was a temporary measure, but has since been extended on several occasions, most recently on 18 December 2020, when ESMA decided on a further three-month extension. This has increased the workload of investors and Finanstilsynet in the form of a rising number of inquiries to user support and an increase in the number of positions to be reported and updated.

In 2020, some 1 950 changes to positions in 54 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, 9 100 positions in 161 instruments were notified to Finanstilsynet. Of these, 5 226 positions were in the new, temporary interval between 0.1 and 0.2 per cent. 238 different investors reported positions in 2020.

During 2020, Finanstilsynet received approximately 500 inquiries by email about the short sale reporting. In 2020, two 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 ESMA on a regular basis.

Transaction reporting

In 2018, Finanstilsynet started using a new system for receiving transaction reports. The obligation to report executed transactions ensues from Section 8-1 of the Securities Trading Act, which implements Regulation (EU) 600/2014 on markets in financial instruments (MiFIR), including the actual reporting obligation pursuant to Article 26. 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. 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 is used, among other things, to uncover market abuse.

In 2020, Finanstilsynet received some 229 million approved transaction reports via TRS. 31 million of these were transaction reports from investment firms in Norway, which is the highest number of approved transactions to date. In addition to the approved transaction reports, Finanstilsynet received approximately 12 million transaction reports that had been rejected or deleted. In 2020, 13 per cent of these reports were from Norwegian investment firms, compared with 11 per cent in 2019. The UK accounted for the largest proportion of transactions reported by other countries at about 40 per cent.

Since the current TRS solution was established in 2018, Finanstilsynet has observed recurring errors and non-reporting or incomplete reporting that have not been rectified by the investment firms on their own initiative. In January 2020, Finanstilsynet therefore sent identical letters to all Norwegian investment firms stressing their obligation to report transactions. In the letter, Finanstilsynet stated that it will systematically review the quality of the firms' transaction reporting. Since a large proportion of the transaction reports are received through ESMA's Transaction Reporting Exchange Mechanism (TREM), Finanstilsynet has also reviewed the reporting from foreign investment firms. The reviews have revealed great variation in the quality of the data from the various investments firms. In Finanstilsynet’s experience, firms and third party providers have taken steps to improve data quality.

The project will be continued in 2021 to ensure that the measures implemented are effective and adequate. Finanstilsynet is planning to expand its controls to include several of the investment firms that were not reviewed in 2020.

Court rulings

On 19 May 2020, the Appeals Selection Committee of the Supreme Court decided not to consider the appeal of the judgment delivered by the Borgarting Court of Appeal in the so-called Funcom case. The case concerned market manipulation and insider dealing in the bond market. A fund manager in a foreign mutual fund and a broker in a Norwegian investment firm were charged with, among other things, having manipulated the price of a bond and thereafter buying a large holding of the same bond at a lower price than would otherwise have been possible to achieve in the market at the time. Both were acquitted in the District Court and the Court of Appeal.