Norwegian banks fined for short selling violations
02 January 2012 Oslo
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Norway's economic crime prosecutor has fined four finance companies NOK400,000 (€51,586) for allowing shares to be sold short before they were eligible for trading. The fines were accepted by all four companies.
Nordea Bank, First Securities (currently Swedbank First Securities), Fondsfinans and Svenska Handelsbanken were reported by Norway's financial regulator, Finanstilsynet, in June of last year following a stock dilution by an Oslo-listed subsea oil and gas support services company. The regulator uncovered the trades in connection with a share sale by Reservoir Exploration in April 2010 when the company issued 2.4 billion shares from 400 million.
It found that many investors had started selling the shares at a considerably higher market value based on the number of outstanding shares prior to the restructuring of the company and before the new shares were “tradable”. Consequently, sellers who sold short made a large profit they were not entitled to, explained Hans Christian Koss, public prosecutor at OKOKRIM, Norway's economic crime unit.
“Banks have a responsibility to make sure that investors own their shares before selling them and need to check that out more firmly than they normally do in some circumstances. In this case, they violated their duties by continuing to sell without asking necessary questions to investors,” said Koss.
Nordea Bank, First Securities (currently Swedbank First Securities), Fondsfinans and Svenska Handelsbanken were reported by Norway's financial regulator, Finanstilsynet, in June of last year following a stock dilution by an Oslo-listed subsea oil and gas support services company. The regulator uncovered the trades in connection with a share sale by Reservoir Exploration in April 2010 when the company issued 2.4 billion shares from 400 million.
It found that many investors had started selling the shares at a considerably higher market value based on the number of outstanding shares prior to the restructuring of the company and before the new shares were “tradable”. Consequently, sellers who sold short made a large profit they were not entitled to, explained Hans Christian Koss, public prosecutor at OKOKRIM, Norway's economic crime unit.
“Banks have a responsibility to make sure that investors own their shares before selling them and need to check that out more firmly than they normally do in some circumstances. In this case, they violated their duties by continuing to sell without asking necessary questions to investors,” said Koss.
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