The Danish rules on insider trading are contained in the Securities Trading Act (STA) of December 20 1995 which entered into force on May 1 1996 and are basically the same as the rules contained in the earlier Securities Market Act, which implemented Directive 89/592 of November 13 1989 coordinating regulations on insider dealing. The Directive is a Minimum Directive and the provisions of the STA are more stringent than those laid down by the Directive.
Under Article 1 of the Directive, the inside information must have a 'significant' effect on the price of the security in question. In the Danish text there is no requirement for significance since this would have led to an undesired modification of the Danish rules existing before the Directive.
The STA does not contain a distinction concerning the persons subject to the Act similar to the one found in Articles 2, 3 and 4 of the Directive. Articles 35 and 36 of the STA prohibit anyone who possesses inside information from acquiring or disposing of shares, or from disclosing such information to others. Thus, unlike the Directive, the STA does not have a wider scope in relation to acquiring or disposing of shares than it does in relation to disclosing information.
The provision in Article 36 has a wide scope and covers anyone who discloses inside information provided that person knew or ought to know that the information in question was inside information. The only exception is when this information is disclosed as a normal part of that person's occupation or position, for example companies reporting to public authorities.
In addition, Article 36 of the STA prescribes the drawing up of internal rules with the aim of preventing inside information from becoming available to others than those who need to know. This requirement extends to both public authorities and to private companies including stockbrokers, lawyers and accountants who because of their occupation regularly obtain inside information.
The STA also contains rules regarding the manipulation of share prices. Manipulation is defined inter alia as the publication or spreading of misleading information about an issuer of stocks.
Danish case law on insider trading is limited. So far only two cases have been brought before the courts.
In the first case, which was decided by the Supreme Court, a finance manager was sentenced to three months imprisonment for selling his shares in the company he worked for. The company was listed on the Copenhagen Stock Exchange, and the manager sold the shares knowing that the company had sustained a loss but before the loss was reported to the stock exchange. In addition to the custodial sentence the manager was fined Dkr50,000 (US$7,950). The sentence (not the fine) was suspended because of procedural matters.
The second case concerns a person external to a company who sold his shares in the company after obtaining inside information. He refused to reveal his source but pleaded guilty. He was sentenced to a three-month suspended prison term, fined Dkr 20,000 and had his profits confiscated. The case is pending on appeal before the High Court.
Two chief executives have also been given fines in the area of Dkr2,000 to Dkr3,000 for disclosing information. These cases were not tried before the court.
The Danish Financial Supervisory Authority is also investigating a case that involves insider trading, manipulation of share prices and breach of the obligation to inform. Because the case is still being investigated, no detailed information is at present available.
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