LEGAL ASPECTS OF FINANCE Lecture 4 Case 4 Matti Rudanko

Case 4: Insider Trading Case Tasks: - see next slides

Possible Tasks and Questions 1 4.1. Try to solve the legal question above in aa), i.e. the damages remedy question. 4.2. Try to solve the same question in b) applying the rules of "traditional " damages law. Legal Aspects of Finance 1

Possible Tasks and Questions 2 4.3. Consider the significance of economic theories such as Efficient Capital Markets Hypothesis and Market Fraud Theory in this case (point b above) for the application of damages liability. Consider in general the damages liability in connection with insider dealing, "a victimless crime" Legal Aspects of Finance 1

Topics and Issues Definition and Main Regulation of Insider Trading ”Disclose or Abstain” Scope of and Exemptions from Application Insider Disclosure and Registers Insider Crimes Liability for Damages and other Special Questions Liability for Damages in Insider Cases Transactions in Own Shares Disclosure Duties, Insider Information and Business Secrets Information Crimes, Information as Property Legal Aspects of Finance 1

Regulation of 28 January 2003 on insider dealing and market manipulation (market abuse); MAD DIRECTIVE 2003/6/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards the definition and public disclosure of inside information and the definition of market manipulation COMMISSION DIRECTIVE 2003/124/EC Legal Aspects of Finance 6

Regulation (cont.: Accepted Market Practices) accepted market practices, the definition of inside information in relation to derivatives on commodities, the drawing up of lists of insiders, the notification of managers' transactions and the notification of suspicious transactions COMMISSION DIRECTIVE 2004/72/EC of 29 April 2004 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards Legal Aspects of Finance 6

NASDAQ OMX Guidelines for Insiders Regulation, National SMA ch. 12 - 14 The Penal Code, ch. 51, sect. 1 - 5 NASDAQ OMX Guidelines for Insiders FSA Standard 5.3: Declarations of insider holdings and insider registers Legal Aspects of Finance 6

Regulation, Cont. (National) Securities Markets Act (14.12.2012 / 746; http://www.finlex.fi/fi/laki/kaannokset/2012/en20120746.pdf ) Ch. 12 – 14 on market abuse and insider registers Ch. 3 – 5 on disclosure duties Marketing and issuance of securities, duty of disclosure (SMA ch. 1 sect. 2 – 4) Legal Aspects of Finance 1

Regulation, Special: Transactions in Own Shares Commission Regulation (EC) No 2273/2003 of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council (Market Abuse Directive) as regards exemptions for by-back programmes and stabilization of financial instruments (Commission Buy-back Regulation) Rule of the Stock Exchange Ch. 5.3 Guidelines of the Stock Exchange on the Own Shares of a Listed Company FSA Standard 1.3 (26.10.2007; not yet in English; ”The Reliable Administration and Arrangement of Business Activities”) Legal Aspects of Finance 6

Regulation, Special: Transactions in Own Shares, Safe Harbours implementing Directive 2003/6/EC of the European Parliament and of the Council as regards exemptions for buy-back programmes and stabilisation of financial instruments COMMISSION REGULATION (EC) No 2273/2003 of 22 December 2003 Legal Aspects of Finance 6

Regulation, Special: Transactions in Own Shares, Safe Harbours, cont. Directive 2003/6/EC (Market Abuse Directive art. 8) The prohibitions provided for in this Directive shall not apply to trading in own shares in ‘buy-back’ programmes or to the stabilisation of a financial instrument provided such trading is carried out in accordance with implementing measures adopted in accordance with the procedure laid down in Article 17(2). Legal Aspects of Finance 6