Guidelines re Trading for own and related persons account
GUIDELINES CONCERNING TRADING IN SECURITIES FOR OWN AND RELATED PERSONS` ACCOUNT
adopted by the Board of the Swedish Investment Fund Association on February 11, 1998 and revised on April 2, 2001, February 13, 2002, June 4, 2002, June 4, 2004, February 6, 2007, June 4, 2008, and November 11, 2010. The guidelines shall be applicable in this wording from January 1, 2011.
The purpose of the guidelines
The guidelines constitute a common standard for the employees and contract personnel of the member companies of the Swedish Investment Fund Association. These are minimal requirements, which can be made more stringent by an individual member company. In certain situations for which the employer may lay down more detailed rules, employees whose work is sensitive can even be prohibited from dealing on their own account in the shares of a particular company, for example.
The guidelines are based on and supplement the provisions of the Market Abuse Penalty Act, the Financial Instruments Trading Act and the Investment Funds Act, and of associated regulations. On certain points, however, the guidelines go beyond the statutory and regulatory requirements.
The Swedish Security Dealers Association (the Security Dealers Association) has adopted rules covering dealing in securities by employees and contract personnel of securities institutions on own account or on behalf of close relatives. The rules are appended to these guidelines. The Investment Fund Association for its part has decided to adopt these rules with the following industry-specific adjustments.
General comments on the application of the Security Dealers Association’s rules
The differences which exist with regard to operations conducted by fund management companies and securities institutions mean that certain of the Security Dealers Association’s rules do not apply any person employed by a fund management company and who has a duty to report, as the Security Dealers Association’s rules comprise situations in which the employee with a duty to report carries out services specific to securities institutions, such as corporate finance or research services, or when the institution exploits an opportunity specific to securities institutions, such as concluding agreements with so-called tied agents.
Adaptation and amendment of specific Security Dealers Association rules
The fund management company should also e.g. through internal guidelines, and in addition to the rules required by these guidelines, regulate the extent to which fund management company employees who are tasked with managing one or more funds, may execute transactions for their own account in financial instruments in which the fund also invests (see point 3.2 “Discretionary management and fund management” of the Securities Dealers Association’s guidelines).
The following adaptation to the Securities Dealers Association guidelines should also be made.
In point 2, “Employer” is defined as a securities institution. This definition shall refer to fund management companies.
In point 3.1.3, “General prohibition regulations”, mention is made of information regarding the order position at a securities institution to which an employee or contract personnel may have access. In the case of employees or of contract personnel for fund management companies, the rule relates to the information that they may have access to regarding the fund management company’s order position. For “customers” read “unit holders” and, where relevant, customers for whom individual portfolio management mandates are executed.
Under the provisions of chapt. 2, §18 of the Investment Funds Act, a person holding a senior position in a fund management company or having access to details of the fund management company’s day-to-day trading may not act as the fund’s counterparty in securities transactions. Over and above this, the Investment Fund Association adds the following to point 3.1.3 above: “No person with a duty to report may act as counterparty to the fund”.
In point 4.1, paragraph 1 “a Person with a duty to report” is defined as a person who has some form of employment relationship with the securities institution’s securities or currency operation and the institution’s Board Members and contract personnel in these operations etc. The definition shall refer instead here to persons with some form of employment relationship with a fund management company and to Board Members and contract personnel etc. in a fund management company. Where the term, “securities or currency operation” is used, it shall refer to “the fund management company operation”.
Point 4.1, paragraph 2, states that Board Members, contract personnel, etc. of securities institutions are required to report all securities held personally or by a related person in cases where they can normally be assumed in the course of their duties as Board Members or in the capacity as contract personnel to have access to classified information regarding circumstances that may influence the price of financial instruments, or other confidential information in relation to customers of the institution’s securities or currency operations. This applies in corresponding cases to Board Members and contract personnel of fund management companies.
Point 4.5, “How transactions may be executed,” shall be replaced with the following:
“All purchases and sales of units in funds managed by the employer on own account or on account of a closely related person shall be treated as normal customer orders. The transactions shall be executed by an employee of the company other than the employee concerned, unless some kind of self-service system intended for customers (e.g. via Internet or telephone) can be used.
“Fund management companies should, in their internal regulations, establish how transactions in financial instruments other than those specified in the preceding paragraph on behalf of the Person with a duty to report or Closely related person, may be conducted.”
Point 6.1, final paragraph states that a duty to report does not exist for UCITS funds, for example, but that the exception in accordance with chapt. 8, §3, point 2 of FFFS 2007:16 does not apply to any person who manages funds or to fund management companies to whom the provision applies. Reference shall, instead be made to chapt. 10, §4, point 2 of FFFS 2008:11 for fund management companies.
In point 6.7, an exception is made from the obligation to report securities transactions and changes in holdings of a closely related person if the said person has a duty to report to a securities institution. In the case of fund management company employees with a duty to report, this exception should apply if the closely related person has a duty to report to the same or another fund management company or to a securities institution.
It should be noted, in connection with point 7, final paragraph, of the Securities Dealers Association’s guidelines that §10 a or §13 of the Reporting Duty for Certain Holdings of Financial Instruments Act (2000:1087) do not apply to fund management companies. It should also be noted that the possibility exists for the fund management company to ensure that trading by relevant persons for own account is reported by means of the registration by the contract personnel with a duty to report with the fund management company, see chapt. 10, §3, FFFS 2008:11.
Allotment rules in connection with oversubscribed flotations
The following shall apply for fund management companies, rather than the allocation rules applicable in conjunction with oversubscribed flotations etc. established by the Securities Dealers Association:
“An employee of a fund management company may not take advantage of his or her position to obtain more favourable treatment than other customers when it comes to allocation of shares or equity-related instruments in connection with a market introduction.”
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