Summary The case involves a dispute as to whether a Member, Arion banki hf., violated sections 3.7.3 and 4.2.3 of the Nasdaq Nordic Member Rules. The facts of the case are that the Exchange's surveillance team became aware of unusual activity involving trading in shares of certain companies listed on the market, with sharp increases in the share prices of the said companies and increased trading volumes. The Exchange's examination therefore focused on possible insider trading. Subsequently, a request was made for all data relating to the said trading from the Member, Arion banki hf., in accordance with section 3.7.3 of the Nasdaq Nordic Member Rules. After the Exchange received data from Arion banki, it became apparent that a broker at the bank had communicated with an investor by phone using a mobile phone provided by the bank that was intended for personal use and therefore not being audio-recorded. In an effort to shed light on the matter, the bank requested that the employee in question summarise in writing the content of the phone calls to the best of the employee's ability, which was submitted to the client for confirmation. The bank subsequently sent the resulting summary notes to the Exchange. The Exchange considered the procedure described above to have been unsatisfactory and that the failure to produce the information required resulted in the Exchange's inability to perform the regular surveillance that it is required by law to perform. The Exchange considered this to constitute a violation of section 3.7.3 and of certain aspects of section 4.2.3 of the Nasdaq Nordic Member Rules and therefore referred the matter to its Disciplinary Committee for resolution. In its findings, the Disciplinary Committee reiterated that section 3.7.3 of the Member Rules obliges Members to provide the Exchange with any information deemed necessary by the Exchange to perform its duties under law and that such information must be provided in the manner prescribed by the Exchange. The information deemed necessary by the Exchange in the said case included audio recordings of phone calls with a specific client. Arion banki proved unable to provide the data requested as a result of its failure to make audio recordings of phone calls with the client in question. When assessing what information the Exchange may reasonably require under section 3.7.3 of the Member Rules, the Disciplinary Committee considered it reasonable to expect the Member to preserve audio recordings of phone calls in the manner required by law. Therefore, the Committee found that the Exchange's assessment of what constituted information necessary for the Exchange was well grounded, not least given the obligations incumbent on Members under law and under their own rules. Regarding the violation of section 4.2.3 of the Member Rules, the Disciplinary Committee noted that the section stipulates, inter alia, that the Member must possess a suitable organisation for the business, the requisite risk management routines, secure technical systems, and otherwise be deemed suitable to participate in trading, in addition to which the Member must at all times ensure that its staff is qualified and possesses sufficient knowledge, experience, training and competence. The Disciplinary Committee pointed out that Arion banki's practice of providing employees with two telephones, one of which was not audio-recorded, had resulted in the failure to preserve phone calls between the broker and the client in which the broker used a phone provided by the Member for the broker's personal use. The Disciplinary Committee further stated that the determination of sanctions must take into account that the Member was unable to provide the Exchange with the information necessary for the Exchange to ensure compliance with its Member Rules and meet the legal obligations incumbent on it. However, the Disciplinary Committee's decision also reflected Arion banki's admission of the failure to preserve audio recordings of the said phone calls and that this was in violation of its own rules on the preservation of trade orders. In addition, Arion banki further stated that it had taken measures to prevent an incident of this type from reoccurring. These explanations by the Member were taken into account. Based on the overall facts of the case, the Disciplinary Committee decided to reprimand Arion banki hf. publicly for violating sections 3.7.3 and 4.2.3 of the Nasdaq Nordic Member Rules. A detailed description of the facts of the case and the decision of the Disciplinary Committee can be found in the attached document (in Icelandic). The Disciplinary Committee The Disciplinary Committee of Nasdaq Iceland hf. deals with and takes decisions on certain cases concerning violations of Rules of Nasdaq Iceland. The Disciplinary Committee, which is appointed by the Exchange's Board of Directors, is comprised of three independent experts. The members of the Committee are Eyvindur G. Gunnarsson, professor in the Faculty of Law of the University of Iceland (chairman), Katrín Ólafsdóttir, PhD in economics and assistant professor at Reykjavík University, and Gróa Björg Baldvinsdóttir, ML in Law and Chief of Sustainability and Culture at Terra umhverfisþjónusta. Attachment: https://cns.omxgroup.com/cds/DisclosureAttachmentServlet?messageAttachmentId=1211890
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