TALLINN STOCK EXCHANGE

ANNOUNCEMENT

15.11.99

 

TALLINN STOCK EXCHANGE SURVEILLANCE COMMITTEE'S DECISION ABOUT AS 

SUPREMA SECURITIES

 

Tallinn Stock Exchange ("TSE") Surveillance Committee discussed the 

violation of the provisions of the TSE Rules and Regulations 

("Rules") by AS Suprema Securities ("Suprema") between 15.06.99 and 

28.06.99.

 

1. Pursuant to article 2.5.5. of chapter "Trading Rules" of the 

Rules, a member firm is obligated to guarantee that the member 

firm's own transactions and client's transactions are effected on 

the value date set in the transaction. The member firm is liable to 

the TSE and the other party to the transaction for effecting its 

own transactions as well as the client's transactions.

 

Suprema failed to guarantee that its own transactions and client's 

transactions were effected on the value date set in the 

transaction, and did not apply immediately sufficient measures to 

effect the transactions timely.

 

2. Pursuant to article 7.3.2. of chapter "Membership Rules" of the 

Rules, a member firm must register on receipt of a client order the 

time of receiving both the written and oral orders and transaction 

conditions.

 

Suprema failed to register the time of receipt and transaction 

conditions for some transaction orders.

 

3. Pursuant to article 6.1.1. of chapter "Trading Rules" of the 

Rules, a member firm is obligated to submit to the TSE a trade 

report on each effected transaction and its conditions immediately, 

but not later than five minutes after the transaction has been 

effected (contract concluded); article 6.1.3. of chapter "Trading 

Rules" of the Rules stipulates that a member firm is prohibited 

from reporting late on transactions without a substantial reason.

 

Instead of informing the TSE of receipt of order from a client 

immediately, Suprema informed the TSE significantly later. If a 

transaction order is received outside the TSE operating hours, the 

TSE must be informed of it at earliest possibility, i.e. at the 

beginning of the trading session of the following stock exchange 

day.

 

4. Pursuant to article 9.4.5. of chapter "Membership Rules" of the 

Rules, a member firm may not perform procedures that do not result 

in change of the owner of the securities, which were the immediate 

object of the transaction, leaving an impression as if the 

transaction was actually performed; article 9.4.3. of chapter 

"Membership Rules" of the Rules stipulates that a member firm is 

prohibited to engage in any activity that may create a wrong or 

misleading understanding of the demand for a security on the 

market, its price or the accompanying rights, and that may cause a 

person to conduct a transaction with securities, or to refrain from 

conducting a transaction with securities, or to use the rights 

accompanying securities, or to refrain from using the rights 

accompanying securities.

 

Suprema conducted repeatedly prohibited transactions between its 

own accounts. Such transactions may leave a misleading 

understanding of trading activity.

 

5. Pursuant to article 7.7.5. of chapter "Membership Rules" of the 

Rules, a member firm is prohibited to lend the client's securities 

that have been placed under its management. This limitation is not 

valid and the lending of securities is allowed, provided that the 

following conditions have been met:

- the member firm has acquired prior written permission from the 

client for lending the securities; and

- the loan is adequately secured and the member firm keeps the 

collateral separately from its own funds; and 

- the member firm sees to it on a daily basis that the market value 

of the assets presented as collateral equaled at least the market 

value of the securities lent. In the event that the market value of 

the collateral is lower than the market value of the securities, 

the member firm must ensure the covering of the difference by the 

borrower or a third party, or use its own funds to cover the 

difference between the market value of the collateral and the 

securities lent. 

 

Suprema violated against the requirements set in the Rules by 

failing to acquire prior written permission from the clients for 

lending their securities, and failing to set collateral for lent 

securities. Such activities may jeopardize the preservation of the 

client's securities, and administration of securities in the 

client's best interests under Suprema's management.

 

 

The Tallinn Stock Exchange Surveillance Committee found that 

Suprema has violated against the provisions of articles 7.3.2, 

7.7.5, 9.4.3 and 9.4.5 of chapter "Membership Rules" of the Rules, 

and against provisions of articles 2.5.5, 6.1.1 and 6.1.3 of 

chapter "Trading Rules" of the Rules.

 

TSE Surveillance Committee resolved:

1. to fine Suprema in the amount of EEK 20 000 for violation of 

article 7.3.2 of chapter "Membership Rules" of the Rules;

2. to fine Suprema in the amount of EEK 20 000 for violation of 

article 7.7.5 of chapter "Membership Rules" of the Rules;

3. to fine Suprema in the amount of EEK 20 000 for violation of 

articles 9.4.3 and 9.4.5 of chapter "Membership Rules" of the 

Rules;

4. to fine Suprema in the amount of EEK 5000 for violation of 

article 2.5.5 of chapter "Trading Rules" of the Rules;

5. to issue a warning to Suprema for violation of articles 6.1.1 

and 6.1.3 of chapter "Trading Rules" of the Rules.

 

 

TSE