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The Danish Securities Trading Act includes various simple provisions forbidding holders of inside knowledge from buying or selling or inducing others to buy or sell listed securities.

Insider knowledge is defined as information about the issuer of the securities that may have an impact on the price of the securities if published.

In 2001 the Danish bank Midtbank was in discussions with the Swedish bank Handelsbanken regarding a possible takeover by Handelsbanken of Midtbank. Before the announcement of a public offer by Handelsbanken, Midtbank acquired treasury shares in a share buyback from another Danish financial institution. Individuals related to the board of directors and management of Midtbank also undertook limited trades in Midtbank shares.

In 2003 the chief executive officer/president and some board members of Midtbank were convicted for insider trading in relation to the share buyback and some board members were convicted for insider trading for their private transactions.

On appeal the High Court has reversed the judgment acquitting all of the accused. The individual board members were acquitted on the basis that the facts did not establish insider knowledge because the negotiations were uncertain and unlikely to proceed.

On the repurchase of shares the court ruled that insider knowledge existed, but imposed a qualification ruling that insider trading requires a transaction to be performed unethically or in breach of principles of justice, to be illegal. Such a requirement of an abuse of insider knowledge disregarded the fact that the Act provides an objective test only.

The judgment and the qualification have created doubt on the objective test. The prosecution is seeking permission to appeal to the Supreme Court. It is expected that the decision will have an impact on the Danish implementation of the Market Abuse Directive, which is likely to take place in late 2004.

Steen Jensen

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