New Harmonized Nasdaq Rules for Issuers of Shares – A Swedish Perspective
14 May 2020
Authors: Mattias Friberg, Khaled Talayhan and Emma Greiff
A new Nasdaq Rulebook structure
On 1 May 2020, Nasdaq’s new Nordic Main Market Rulebook for Issuers of Shares (“Nasdaq Rulebook”) entered into force. The new Nasdaq Rulebook is an effort to harmonize the rules of the Nasdaq main markets in the Nordics. However, it is not a full harmonization; some separate local rules are still included as national supplements to the Nasdaq Rulebook, such as most of the rules regarding the admission process and certain rules which are affected by differing national legislation, market practice and regulatory requirements.
From a Swedish perspective this means that the section of Nasdaq Stockholm’s Rule Book for Issuers which related to shares is now obsolete, whilst the sections regarding fixed income instruments and exchange traded funds are still applicable and have now been moved to separate rulebooks without any changes. The changes relating to the Nasdaq Rulebook do not affect the rules for Nasdaq First North Growth Market, which is governed under its separate rulebook.
A number of changes are codifications of already established practice, and some of the rules have been removed since they are covered by other types of regulation such as the EU Market Abuse Regulation (MAR). Generally, the new Nasdaq Rulebook has been prepared with the aim to make the rules as clear, objective and foreseeable as possible. This entails, for example, moving certain previous guidance text to the body of the rule text and aiming to be explicit about what is required to fulfil the rules.
Set out below, the most significant changes from a Swedish perspective are briefly presented.
Changes relating to new listings
Alleviations regarding experience within the board and management
The previous requirement regarding experience from listed companies within the board of directors and management, which was more oriented towards individual experience, has been removed. The previous rule resulted in many companies having to, among other things, hire an IR consultant ahead of the listing and thereafter. In the new Nasdaq Rulebook, the focus of experience is more collectively oriented, and the members of the board of directors and management will only be required to have held their positions for at least three months prior to listing, to have participated in the production of one annual or interim financial report, and to have participated in the Exchange’s training regarding the obligations of a company listed on Nasdaq Stockholm. This level of knowledge and experience is believed to be sufficient, along with the already existing requirements on the issuer’s internal processes and routines particularly in the area of providing information to the market.
The role of the Exchange Auditor clarified
The role of the Exchange Auditor – the external auditor appointed by Nasdaq Stockholm to review an issuer – is clarified and defined in the Swedish supplement to the new Nasdaq Rulebook, as well as in an updated version of separate instructions to the Exchange Auditor. The previous rule explaining non-exhaustive examples of the scope of the Exchange Auditor’s review has been removed. In removing this, Nasdaq wants to clarify that the Exchange Auditor’s review is focused on whether or not the issuer fulfils the admission requirements.
Changes to requirements for already listed companies
New rules relating to international sanctions and Nasdaq’s surveillance
Codifying existing practice, rules on screening issuers in relation to international sanctions have now been included as a separate rule, entailing requirements for issuers to pass a sanctions screening at any time upon request from Exchange while the issuer’s shares are admitted to trading.
As a new rule in the surveillance area, the Exchange may recover costs from the issuer in connection with the Exchange’s surveillance of the issuer if such costs exceed normal levels.
New rules and amendments regarding information disclosure obligations
The guidance regarding disclosure of inside information previously found in the national rulebooks has been removed, and Nasdaq Stockholm has published a separate guidance document on this for the Swedish market. This guidance is thus not harmonized, but an effort to align the guidelines from Nasdaq with each jurisdiction’s application of MAR and other related local legislation.
Companies will also be required to disclose information of liquidity enhancements pursuant to the new Nasdaq Rulebook. Previously only existing in the Helsinki rulebook, this is now included in the harmonized rules because it is viewed as important information for investors.
The previous rule regarding obligations to disclose information on closely related party transactions has been removed from the Nasdaq rules. The reason for this is the implementation of EU’s Second Shareholder Rights Directive into national legislation throughout the EU, including Sweden, including governance and information disclosure rules for closely related party transactions.
Apart from the harmonization, which in itself is a material change, the vast part of the new and amended rules are modifications required in view of developed practice and new laws in the area. The focus of the amendments is on information disclosure and surveillance rules, even though the perhaps most material news is the alleviation of the requirements regarding experience from listed companies within the board of directors and management in connection with new listings.