On Thursday at 10.00, Finanstilsynet released the final report after a ten-month review of a select group of Euronext Growth IPOs in 2020 and 2021.
In the report, Finanstilsynet writes, among other things, that Borsen’s processing of admissions cases, i.e. companies wanting to be listed, is “in part characterized by very fast processes”. […]».
From January 1, 2021 to September 14, 2021, 104 companies are listed on Euronext Growth. In addition, there were ten listings on the main list, five of which were transferred from other trading places on the stock exchange.
There was a department of five people, plus a manager, who handled the rolls during this period.
Finanstilsynet believes that the size of the partition means there will be increased work pressure and “less space to discover issues not highlighted in the application”. In addition to handling listing issues, the five department employees also have other work tasks in addition to processing listing requests.
Finanstilsynet also notes in its report that four of the five employees in the listing division must not only control and handle orders, but also have marketing responsibility for their respective industry segments.
The same person must have conducted corporate marketing by Børsen, and processed the listing application from the same company, apparently. The Direct Market Manager was also involved in marketing for Euronext Growth.
This manager also receives a bonus related to budget completion, and Finanstilsynet notes that the revenue is supposed to increase the number of companies allowed to trade.
“So Finanstilsynet wondered if the expected bonus scheme for the Direct Market Manager would give exactly the same result as the new admission target, and whether further actions were needed to deal with this conflict of interest,” she says.
Subsequently, Oslo Poor’s decided to divide the listing department into the sales department and the listing approval department. The active role of the direct market manager in processing acceptances is now replaced by another manager.
In addition, Borsen decided not to engage employees in the processing of orders, which apply to the director of the exchange.
“Oslo Bowers will also look in more detail at the criteria for bonus schemes for all employees. In this regard, the remuneration scheme for the direct market manager will be reviewed, and business objectives related to the admission of new companies will not be part of the scheme,” the audit writes.
The Oslo Stock Exchange states that it is relatively normal for the case processing time to be extended, and that the average processing time should be around seven trading days in 2020 and 2021. The exchange is now extending the case processing time from ten to 15 days, and from five to Nine days for “fast track”. Borsen also mentioned in her response that she will increase the number of years of work in the listing department
Thus, Finanstilsynet’s investigations included a selection of listings over the past two years, as well as alleged substantive inspections of both the Oslo Stock Exchange and the brokerage houses that facilitated the listings.
Regarding the exchange’s role in listings at Euronext Growth, Finanstilsynet writes in the report that the Oslo Stock Exchange has not identified or dealt with all potential conflicts of interest.
The Authority also believes that the exchange should take measures to ensure that Euronext Growth regulations meet the requirements of the Securities Exchange Act for “clear” regulations.
“The organizational structure appears relatively complex and confusing, and parts of the regulations are inaccurate or difficult to interpret,” she says.
Criticism of brokerages
Finanstilsynet is also critical of the brokerages examined in the review, ABG Sundal Collier, Carnegie, DNB Markets, Nordea Markets, Pareto Securities, SEB, SpareBank 1 Markets and Swedishbank.
- The Authority believes that the brokerage firms’ disclaimer in the information document provided by the company at the time of listing exceeds what is permitted by the Securities Trading Law. Brokerages cannot waive “any responsibility” for the information provided, Finanstilsynet points out.
- Some brokerages have violated the obligation to record the audio of conversations with candidates on the exchange.
- Finanstilsynet also has, as previously known, that some brokerage firm employees bought shares in companies before the first stock analysis was published.
“Finanstilsynet has not found any violation of the proprietary trading rules, but nevertheless has determined to the companies that investment firms must prevent risks of conflict of interest between the company and its clients, and that market integrity is best safeguarded,” the authority writes.
Held on the site last year
The audit launched an investigation into the circumstances surrounding several IPOs in the low-threshold market formerly called Mercure Market in March of last year.
The brokerages that assisted the companies in the listing process were asked to document all conversations, analyzes and proprietary trading in a select group of companies that had been listed since the summer of 202. The Oslo Stock Exchange and auditors of the issuing companies were also requested to provide documentation.
Ann Mereth Bellamy, director of market supervision at Finanstilsynet, confirmed that the supervision was initiated due to a very high level of activity at Euronext Growth.
Finanstilsynet takes a closer look at the acceptances and securities transactions, including relevant documentation, relating to selected issuers that have been accepted for trading on Merkur Market / Euronext Growth.
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