TSE surveillance committee decisions

11.05.2004 TLN

Tallinn Stock Exchange press release
6.05.2004

TRANSACTIONS WITH ESTIKO SHARES

Brief summary

1. During the course of supervisory proceedings, the Tallinn Stock Exchange learned that AS Rondam, the major shareholder of Estiko, has acquired a total of 69,187 shares of Estiko by four transactions made during different restriction periods.

2. Estiko had repurchased shares from its shareholders for a length of time, all of which it sold to Rondam in 2003. Estiko did not inform the public of its treasury stock transactions or the transactions with a connected person. Neither was the transaction properly recorded in the 2003 financial reports of Estiko. The Committee further established that the treasury stock had been on the balance sheet of Estiko for over two years, which is contrary to the provisions of the Commercial Code, but the Stock Exchange is not however a competent body to solve this matter.

Decision

For the several above-listed violations, the Committee decided to punish Estiko by a total fine of EEK 50,000.

Comment by Tallinn Stock Exchange

The Tallinn Stock Exchange draws the attention of listed companies to the restrictions on making transactions by insiders during the restriction period.

“The number of transactions made during the restriction period has become more frequent recently, which is why we are asking the listed companies and insiders to exercise greater diligence than before,” said Managing Director of the Tallinn Stock Exchange Jaanus Erlemann.

An exception can be previously applied for if there is a need to make transactions during the restriction period. According to Erlemann, Kalev, who was recently granted such an exception, is a good example.

The Tallinn Stock Exchange also draws the attention of listed companies to the need for due compliance with the publication obligation both as regards the transactions of companies with their own shares and particularly transactions with connected persons. Publication of information on transactions with connected persons is crucial for the transparency of the market.


PUBLICATION OF FINANCIAL RESULTS OF BALTIKA

Brief summary

On 26 September 2003, Baltika published a forecast on h3 2003 results. On 27 February 2004, Baltika announced financial results which were substantially below the forecast. The profit forecast was not adjusted in the meantime.

Decision

The Committee decided to impose a fine of EEK 5000 for the aforementioned violations.

Comment by Tallinn Stock Exchange

The Tallinn Stock Exchange reminds the listed companies that upon material changes in the published profit forecasts, the company is required to inform the investors thereof immediately. The fact itself that the forecast was changed is the most important. It may not always be possible to publish the scope of the change, because specific figures cannot always be forecast immediately.

On the other hand, the Tallinn Stock Exchange would like to encourage listed companies to publish information about their visions of the future, as TSE sees this as an important criterion for achieving reliability of the market and giving the more information for making investment decisions.

“We want to point out Baltika as a positive example to the listed companies, as it published its forecasts to the investors and will hopefully continue to do so in the future. This is why the Committee decided to impose only a symbolic penalty on Baltika,” Erlemann said.


ACTIVITY OF HANSAPANK IN EXECUTING BALTIKA SHARE ORDERS

Brief summary

The financial results of Baltika published on 27 February 2004 were substantially below the forecasts previously published. Before publishing its results, the order book for Baltika shares contained three purchase orders for a total of 2075 shares, entered via Hansapank.

Within five minutes after publication of the stock exchange announcement, Hansapank executed these purchase orders at the pre-announcement price of EUR 1.64–1.68. Within about 50 minutes after the announcement, the price of the Baltika share fell to EUR 1.49 (fall of 11.3%).

According to the Rules, a member of the Stock Exchange has to act professionally and diligently, proceeding first and foremost from the interests of its clients and the securities market as a whole. The Tallinn Stock Exchange studied the behaviour of the Hansapank broker in this situation.

Conclusion of Committee

The Committee did not establish a violation, because the Hansapank broker followed the provisions of the brokerage agreement with the client. The brokerage agreement did not elaborate on the handling of orders in the order book upon the publication of important news and the investors did not give Hansapank more detailed instructions on how to act in such a situation.

Comment by Tallinn Stock Exchange

The Tallinn Stock Exchange draws the attention of investors to the potential risks of entering transactions automatically, i.e. without using a broker. We also suggest that in order to avoid such situations in the future, listed companies should publish important information before the beginning or after the end of the trading day, so as to give investors sufficient time to read the news and make any adjustments they wish to make in their transaction orders.


TRANSACTIONS WITH KALEV SHARES

Brief summary

On 25 March, a transaction of OÜ Mailtec, a company connected with Oliver Kruuda, with the shares of Kalev was made at the Estonian Central Register of Securities. A restriction period for insiders of Kalev began on the same day.

Conclusion of Committee

The Committee established that OÜ Mailtec made a contract for selling the shares on 19 March and gave the relevant transaction instructions to the bank on 22 March 2004. The transaction was effected in the Estonian Central Register of Securities on the third day or the value date (T+3) as in line with the TSE Rules, i.e. 29 March 2004. Therefore, the Committee established that the transactions made by insider with the company’s shares were not made during the restriction period.


Further information:

Eva Palu
Communications Manager, Tallinn Stock Exchange
+372 640 8862