Following the recent turbulence in the financial markets, not only in the aftermath of the so-called credit crunch but also, among others, the notable insider trading and general disorder in one of Sweden's largest investment banks, the Swedish Financial Supervisory Authority (SFSA) has picked up some momentum and is becoming increasingly tough in its role as market watcher.
On October 1 2008 the SFSA announced that it is withdrawing Nordic Growth Market's (NGM) permit to conduct exchange operations with immediate effect. The SFSA has given NGM six months to terminate all of its operations, both as an exchange and as a multilateral trading facility (MTF). During this winding-up period, the companies at NGM will continue to be considered as listed companies until an alternative solution has been established.
The reasons for the SFSA's actions are that NGM has obstructed the SFSA's supervision of operations in numerous ways. The SFSA states that this has been done by the main owners, board members and the CEO. Furthermore, the SFSA states that NGM has not been able to maintain functioning and independent market surveillance. NGM is also said to have been giving special treatment to its owner, NGM Holding, which disrupts confidence in the securities market. Consequently, NGM has squandered the SFSA's trust and confidence to operate an exchange: hence the firm action against NGM.
On the same day, the SFSA also announced that it is issuing a warning and imposing the maximum financial penalty of SKr50 million ($6.9 million) on Forex, a Swedish bank with a focus on the exchange and purchase of foreign currencies for individuals, due to structural deficiencies in its management of money laundering issues.
These events follows Mats Odell's (Swedish Minister for Financial Markets) declaration that the government has decided to increase the SFSA's budget. The additional money is aimed at, among other things, increasing the SFSA's ability to handle and supervise the upcoming implementation of the EU's third money laundering directive and to secure a more lasting employee situation, improving general expertise and strength within the SFSA. At present, four out of a total of seven of the management, including the director general, are substituting vacant positions. Furthermore, the annual employee turnover is close to 20%, and it is not uncommon for Swedish banks to recruit the larger part of divisions within the SFSA. One recent example was when the entire Basel II and securitisation team of the SFSA left the SFSA and joined big Swedish banks.
It is also worth noting Skandinaviska Enskilda Banken AB's recruitment last year of Gent Jansson as compliance officer. Jansson left his position as deputy director general and head of the legal department of the SFSA, which is clearly an indication of the high level of respect for the SFSA and the willing obedience of the institutions.
We can therefore see a clear signal to the market that the previous era, where the SFSA was a slightly more discrete force, is over and that financial institutions had better comply with financial laws and regulations or be forced to explain and face sanctions.
Simultaneously, Mats Odell emphasises the government's aim to increase the financial market's role in the overall economy, which today only contributes 5% of Sweden's GNP.
Consequently, the market will definitely monitor the SFSA's actions and be cautious in its own activities. Sweden is likely to see in the near future an increased involvement of the SFSA, this happening simultaneously with the Swedish implementation of the next step in the EU money laundering directive, which happens to coincide with the Swedish presidency of the EU.