J.P. Morgan Securities Ltd and Lehman Brothers International (Europe) have both breached Stockholm Stock Exchange rules that state that a party who acquires 5% or more of the shares in a listed company must disclose the acquisition.
Each of the two companies has acquired more than 5% of the shares in Song Network Holding AB without openly disclosing the acquisitions. Accordingly, Stockholm Stock Exchange’s Disciplinary Committee has decided to warn both companies.
J.P. Morgan and Lehman Brothers are both members of Stockholm Stock Exchange. Exchange Members must abide by the Swedish Industry and Commerce Stock Exchange Committee’s rules concerning the disclosure of acquisitions and transfers of shares. According to these rules, a member who acquires shares in a listed company and thereafter owns 5% or more of the share capital or voting rights must disclose the acquisition not later than 9 a.m. on the trading day that follows the date of acquisition. At the same time, Stockholm Stock Exchange must be informed. This also applies to cases where the shareholding falls below 5%.
On 24 September 2004 J.P. Morgan acquired more than 5% of the shares in Song Network. Song was the target of two competing public offers at this time, which made the change in shareholdings in the company of considerable interest to the market. However, J.P. Morgan did not disclose the acquisition in time or in the correct manner, and also failed to inform the Exchange. In addition, on 30 September 2004, J.P. Morgan sold so many shares that its shareholding fell below 5 percent. Nor was this change disclosed, or the Exchange informed.
Also Lehman Brothers acquired shares in Song – on 28 September 2004 – so that its holding exceeded 5%. Lehman Brothers did not disclose the acquisition or inform the Exchange.
The Disciplinary Committee found that both J.P. Morgan and Lehman Brothers had disregarded generally acceptable practices in the Swedish securities market and therefore decided to warn each of the two companies.
The role of the Stockholm Stock Exchange’s Disciplinary Committee is to consider suspicions regarding whether Exchange Members (i.e. banks and brokerage firms) or listed companies have breached the rules and regulations applying on the Exchange. If Stockholm Stock Exchange suspects that a member or a listed company has acted in breach of Stockholm Stock Exchange’s rules and regulations, the matter is reported to the Disciplinary Committee. Stockholm Stock Exchange investigates the suspicions and pursues the matter and the Disciplinary Committee issues a ruling regarding possible sanctions. The sanctions possible for listed companies are a warning, a fine or delisting. The fines that may be imposed range from one to ten annual fees. The sanctions possible for Exchange Members are a warning, a fine or debarment. The Disciplinary Committee’s Chairman and Deputy Chairman must be lawyers with experience of serving as judges. At least two of the other members of the Committee must have in-depth insight into the workings of the securities market.