Disciplinary fine of EUR 20,000 for Benefon Oyj for violating the
disclosure rules
The Disciplinary Committee of the Helsinki Stock Exchange has decided to
issue Benefon Oyj a disciplinary fine of EUR 20,000 for the violation of
the regulations regarding the disclosure obligation.
On October 26, 2005, Benefon Oyj released its result and turnover
forecast for 2006. According to the estimate, the turnover from the
accounting year 2006 was expected to be approximately EUR 66.5 million
and the net result EUR 7.5 million. The starting of the sales of a new
product during the first quarter of 2006 and related distribution and
production agreements formed the basis of the estimate.
The majority of the company's estimated turnover and result were
intended to be reached with the new product. The company stated that the
estimates are based on assumptions and they include uncertainties. The
company added reservations to the estimate concerning funding, personnel
stability, growth management and ability to cope with mobile
communication changes and trends.
The Disciplinary Committee determined that the turnover and result
estimates presented by Benefon were accurate. The risks related to the
estimates were on the other hand presented loosely, and it was not
possible for investors to assess the risk probability or effects on
their basis.
The Disciplinary Committee points out that a listed company cannot
efficiently withdraw from responding to its future estimates by
presenting such reservations concerning general business risks.
Reservations related to the future development views must be as
thoroughly grounded as the numeric values.
Profit warning and release of changed information
The Disciplinary Committee considers it proven that Benefon did not
release substantial changes in its result and turnover estimates without
undue delay during the period January 12-May 19, 2006 (`profit warning'
regulations 3.2.43-3.2.47), or changed information concerning the
release of its new product (regulation 3.1.7).
On January 12, 2006, the company repeated the presented result estimate
regarding the production and sales of the new product to be started
during the first quarter of 2006. The majority of the company's foreseen
turnover was intended to be reached with the product. On May 19, 2006,
the company released information that the launch of the new product
sales was to be postponed to the third quarter of 2006 and, as a result,
the company cannot reach the estimated result in 2006. The Committee saw
that the company management must have been aware of the change
substantially earlier than on May 19, 2006 when the information was
released in connection with the interim report. The changes in the
estimate and previously released information should have been released
without undue delay after the change had become apparent and the
management was aware of them. The company has not presented reasons why
the project delay was not a surprise to the management until the release
of the interim report. The Committee concluded that, considering the
significance of the information, the violation must be regarded as
serious.
The diligence obligation for the management of a listed company requires
that it has sufficient reporting systems with which the result and
turnover development is monitored. Because the product was of
considerable importance for the company and the development of the
company's financial situation almost entirely depended on the product,
the company management had a special obligation to monitor this project.
Consistency of information
The Disciplinary Committee noted that the company has used the term
'launching' in its released announcements in a manner that has been
inconsistent and misleading to investors (regulation 3.1.2). The company
has not provided sufficient or consistent information on the issue which
might have misled investors.
Concurrence of communications
The Disciplinary Committee also noted that Benefon has violated the
concurrence requirement for communications (regulations 3.1.1 and
3.1.8). On June 26, 2006, the company released a press release
concerning the new product schedules and result estimate revisions. The
company made the issue official with a stock exchange release on June
28, 2006.
Section 3.1.1 in the Stock Exchange rules concerns the communication
obligation regarding listed companies. According to the regulation, the
obligation to provide information is designed to ensure that all parties
operating in the market simultaneously have at their disposal sufficient
and correct information on the issuer of listed securities and the
listed security, in order that the value of shares and other listed
securities may be determined in a well-founded manner. Investors use
information disclosed by issuers in evaluating their listed securities.
The Disciplinary Committee stated on the company's initial situation
that Benefon has gone through a business re-organization process, which
ended in June 2005. The company's securities are on the surveillance
list in the Helsinki Stock Exchange. In this case, the purpose of the
surveillance list has been to direct investors' attention to the
company's financial position. On the basis of this, the requirements of
the obligation for providing information cannot however be compromised.
Investors must be able to rely on the company to provide only
well-founded future estimates.
The Helsinki Stock Exchange directs investors' attention to the fact
that Benefon Oyj's share is on the surveillance list. On the basis of
the decision of the Disciplinary Committee, the Stock Exchange notes
that the regulation concerning the transfer to the observation segment,
2.1.8 ii) a serious breach of other exchange rules pertaining to listed
companies, is also met.
Resolution
The Disciplinary Committee of the Helsinki Stock Exchange stated that
Benefon Oyj has violated the rules of the stock exchange. These
violations cannot be considered minor. The Committee ordered Benefon
Oyj to pay a disciplinary fine of EUR 20,000. The seriousness of the
violations and the company size were taken into account when calculating
the amount of the disciplinary fine.
For more information:
Timo Rintanen, Secretary of the Disciplinary Committee, Head of
Enforcement +358 9 6166 7640
Janne Seppänen, Head of Surveillance +358 9 6166 7382
The Helsinki Stock Exchange donates its disciplinary fines to a
foundation that sponsors research related to securities markets in
Finland and Sweden.
Further information about the Disciplinary Committee and its members, as
well as the regulations of the Disciplinary Committee, are available on
the Helsinki Stock Exchange website at www.omxgroup.com/helsinginporssi.
Market surveillance of the Helsinki Stock Exchange
The surveillance unit of the Helsinki Stock Exchange investigates all
suspected breaches of regulations. Minor breaches will result in
written criticism of the company, whereas more serious cases are
referred to the Disciplinary Committee.
The members of the Disciplinary Committee are legal and financial
experts independent of the Helsinki Stock Exchange. The Chairman of the
Committee is Mr. Mikko Tulokas, Supreme Court Justice, and the members
are Professor Risto Nuolimaa, Professor Kalervo Virtanen and
Mr. Simo-Pekka Helander LL.M.
The possible sanctions for a breach of regulations include a reprimand,
a warning, a disciplinary fine and, in extreme cases, a de-listing
proposal.
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