The Ministry of Justice has in a recent Government Bill proposed amendments to the Finnish Act on Trading in Standardized Options and Futures. Such amendments are intended to mitigate the statutory restrictions relating to the offering of non-standardized options and futures to certain investors.
Currently, the Options Act provides that no other options or futures than those standardized in the rules of a Finnish options entity may be offered to persons other than persons carrying on a trade. According to the preparatory works of the Options Act, the definition of "persons carrying on a trade" shall be deemed to cover individuals, legal entities and foundations that have been entered into the Finnish Trade Register as tradesmen. Despite the definition contained in the Options Act, the investor's actual understanding of the derivatives instruments in question has in practice, however, been considered more relevant than the very formal criterion of entry into the Trade Register.
According to the Bill, options or futures other than those standardized in the rules of a Finnish options entity may be offered to professional investors, as defined in the Securities Market Act. Pursuant to the Securities Market Act, Finnish investment firms, Finnish credit institutions and a number of other entities are automatically considered professional investors, while other investors may qualify as professional investors either by notifying the provider of investment services, or alternatively, on the basis of a notification by the provider of investment services which has not been objected by the investor. The Bill also introduces an exemption from the above restrictions according to which a licensed securities intermediary may offer non-standardized options and futures also to non-professional investors.
Further, the Bill mitigates the restrictions in providing that options and futures equivalent to those standardized in the rules of a Finnish options entity are not covered by the above restrictions. The intention is that the prohibition on offering other options or futures than those standardized in the rules of a Finnish options entity to non-professional investors shall not apply to options and futures traded with on a regulated market in respect of which market a communication has been effected in accordance with the Directive 93/22/EEC (such as the German Eurex where a major part of the Finnish standardized derivatives are traded with as of September 1999).
Finally, the Bill expressly allows the offering to employees of options and futures linked to shares of the employing company or its group company. These types of compensation schemes have in certain situations been considered prohibited under the current legislation.
The amendments are intended to become effective once approved by the Finnish Parliament.