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Finland

Finnish penal provisions on securities markets to be amended

A government bill amending the Securities Market Act, the Act on Trade in Standardised Options and Futures (the Options Act) and the Penal Code was submitted to the Finnish Parliament in late 1998. The objective of the proposed amendments is to transfer the main criminal law provisions, including those governing misuse of insider information and market manipulation, from the Securities Market Act and the Options Act to the Penal Code as well as to redefine the concepts of such criminal action.

According to the bill, the provisions on misuse of insider information apply to any person who, for the purpose of achieving financial benefit for himself or someone else, uses insider information by dealing in securities either on his or her own or on another person's account or by providing advice, whether direct or indirect, concerning trading in listed securities. Therefore, the use of insider information received in business consultations or accidentally could also qualify as misuse of insider information. Refraining from the selling or buying of securities on the basis of insider information, nevertheless, continues to be allowed, as under the current legislation.

The bill also addresses the impact of a due diligence review on the applicability of the insider provisions. The proposed provisions are not intended to be extended to the exchange of information for the purposes of estimating the value of abusiness in connection with its acquisition. The use in the ordinary trading of securities of insider information so obtained will, however, qualify as misuse of insider information.

The bill proposes to redefine the concept of insider information to include any information likely to materially affect the value of a publicly traded security (and not only information that concerns such a security).

The bill further proposes to redefine the concept of prohibited market manipulation. This could also relax the position on price stabilization in connection with securities offerings. While the Finnish Financial Supervision currently considers stabilization in Finland (in the absence of express provisions to the contrary) as prohibited market manipulation, it has also indicated that the implementation of the bill and the possible introduction of market rules for stabilization (eg by the Helsinki Stock Exchange) would be sufficient to allow for stabilization in the Finnish securities markets.

The amendments are intended to become effective from the beginning of May or June 1999.

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