Rules on the Handling of Inside Information and Insider Trading
Approved at a meeting of the Board of Directors on September 29th 2005.
Prepared by Compliance Officer, September 2005.
Approved by Managing Director of Legal Services, September 2005.
1. Scope
These rules apply to Kaupthing Bank hf. (hereinafter referred to "the Bank"). These rules apply to insiders at any given time as they are defined in Art. 2 of these rules, and their trading in financial instruments issued by the Bank which have been listed or for which listing has been sought and financial instruments connected to them. The rules also apply, as appropriate, to parties who are financially connected to insiders.
2. Definitions
2.1. Primary insiders: parties who generally have access to inside information by virtue of membership of the administrative, management or supervisory bodies of an issuer, or because of other employment on behalf of an issuer of securities.
2.2. Temporary insiders: parties who are not considered primary insiders but possess inside information by virtue of ownership, their employment, position or duties.
2.3. Other insiders: parties who are not considered primary insiders or temporary insiders but have acquired knowledge of inside information, provided the person in question knew or should have known the nature of this information.
3. General provisions
3.1. When the term insiders is used in these rules without restriction, it applies to primary insiders, temporary insiders and other insiders, as applicable.
3.2. The term compliance officer in these rules applies equally to the Compliance Officer and the deputy Compliance Officer, as applicable.
3.3. The term market in these rules applies to regulated securities markets and multilateral trading facility pursuant to Act no. 34/1998.
4. Insider lists
4.1. Obligation to send lists of insiders
The Bank shall send the Financial Supervisory Authority (FME) information on primary insiders, temporary insiders and parties financially connected to them. All changes to information on insiders must be sent to the FME as soon as changes are made. If no changes to the list are made, a revised list shall be nevertheless sent to the FME every six months. The Bank shall also send information on insiders and relevant changes to the market where the Bank's securities are listed or where listing for them has been sought.
4.2. Safekeeping of lists of insiders
The Bank shall keep all lists of insiders which have been sent to the FME for five years from the date on the list.
4.3. Format of lists of insiders
Insider lists shall be sent on forms which can be found on the website of the FME. It should be ensured that the e-mail address and electronic signature of the Compliance Officer appears on every form. If an electronic signature cannot be used, signed lists of insiders shall also be sent to the FME by fax.
A list of insiders shall be dated the day it is sent to the FME.
4.4. Board of Directors' criteria for primary insiders and managers
The Board of Directors shall establish a set of criteria about who shall be put on the list of primary insiders. The Compliance Officer shall use these criteria when preparing a list of insiders and evaluate which employees should be included on such a list.
The Board of Directors shall also establish a set of criteria on which primary insiders shall be considered managers, pursuant to paragraph 3, Art. 64 on Act no. 33/2003 on Securities Transactions due to announcements to the market on trading by managers.
4.5. Notification of the legal position of insiders
The Bank shall notify parties on the list of primary insiders and temporary insiders of the legal position of insiders. Notification shall be sent in writing. It is permitted to send notification by e-mail if the insider's e-mail address is known. The insider shall confirm having received the notification. The notification of the legal position of insiders should explain to the insider the rule of law which applies to insiders and the handling of inside information.
4.6. Contents of the notification
A copy of these rules or information on where they are available should be sent along with the notification. The current legal provision on insider fraud shall also be presented. Primary insiders should also be informed of the rules which they and other connected parties must comply with when trading in securities in the Bank. Temporary insiders should be made aware that they are strictly prohibited from trading whilst in possession of inside information.
4.7. Forms on financially connected parties and the signing of a declaration
When notification of the legal position of insiders is sent to insiders, a form on financially connected parties should also be sent to insiders to fill out. Insiders should also be sent a declaration to sign that he or she has read the notification of the legal position of insiders. Insiders should send both these documents to the Bank immediately. The Bank shall keep the signed declaration whilst the insider list is active and for at least one year after the insider list has been cancelled.
4.8.Removal from list of insiders
An insider shall be notified in writing that he or she has been removed from the list of insiders. It is permitted to send such notification by e-mail if the e-mail address of the insider is known. An insider shall confirm having received this notification.
4.9. List of primary insiders
A list of primary insiders shall record all parties covered by the definition in Art. 2.1 of these rules, cf. sub-paragraph 1, paragraph 1, article 58 of Act no. 33/2003 and the criteria established by the Board of Directors of the Bank in Art. 4.4 above. The list shall be sent on the form found on the website of the FME and it shall specify:
a. the name of the Bank
b. the market on which the Bank's securities are listed or on which listing has been sought
c. name and ID-number (if applicable) and address of insider
d. insider's connections to the Bank (e.g. chairman of board, managing director, key employee etc.)
e. date when insider in question is defined as such and put on list
f. signature of Compliance Officer
g. date of list, i.e. when list was compiled or revised and sent to the FME
4.10. Temporary lists of insiders
The Bank is obliged to send the FME a list when inside information is available and parties who are not on the primary insider list have gained access to the information.
If inside information is available about one or more events or about circumstances concerning the Bank, one temporary insider list must be sent for each event and/or set of circumstances.
4.11. Format and contents of list of temporary insiders
Lists of temporary insiders shall record all parties covered by the definition in Art. 2.2 of these rules, cf. sub-paragraph 2, paragraph 1, article 58 of Act no. 33/2003. The list shall be sent on the form found on the website of the FME and it shall specify:
a. the name of the Bank
b. the market on which Bank's securities are listed or on which listing has been sought
c. the reason for creating a temporary insider list, i.e. a short description of the events or circumstances on which an insider has obtained information (e.g. by working on publication of financial results, a possible profit warning, takeover agreement etc.)
d. name and ID-number (if applicable) and the address of insiders
e. connection between insiders and the Bank (e.g. auditor, attorney, PR officer, employee in book-keeping etc.)
f. the date when the insider in question is defined as such and placed on the list
g. signature of the Compliance Officer
e. date of the list, i.e. when the list was put together or revised
4.12. Removal of a temporary insider from the list
When no inside information is available the FME shall be notified accordingly and given notification that temporary insiders have been removed from the list.
4.13. List of financially connected parties
The Bank is obliged to send a list of financially connected parties simultaneously along with lists of primary insiders and temporary insiders. The list of financially connected parties shall include all those included in the definition in Art. 4.14.
4.14. Definition of financially connected parties
The following parties shall be considered financially connected to insiders in the sense of Chapter IX of Act no. 33/2002 and these rules:
1. Spouse, registered partner and co-habitant
2. dependent children, adopted children and stepchildren living at home of insider
3. other relatives who live at the home of an insider and have lived at the home of an insider for at least one year when trading takes place
4. legal entity:
a) of which the managing director is an insider or a party as defined in items 1,2 or 3 above,
b) which is managed directly or indirectly by an insider or a party as defined in items 1,2 or 3 above,
c) other than in items a) or b) if its financial interests are closely linked with the interests of an insider or a party as defined in items 1, 2 or 3 above.
4.15. Format and contents of list of financially connected parties
Lists shall be sent on forms which can be found on the website of the FME for parties financially connected to primary insiders on the one hand, and temporary insiders on the other side. The following information shall be specified:
1. the name of the Bank
2. the market on which Bank's securities are listed or on which listing has been sought
3. name and ID-number (if applicable) and the address of insiders
4. specify which primary insiders or temporary insiders are connected. It is often sufficient to use the initials of the connected insider
5. status, specify what the connections are with primary insiders and temporary insiders (e.g. spouse, child, legal entity owned by insider, legal entity managed by insider)
6. the date when the insider in question is defined as such and placed on the list
7. signature of the Compliance Officer
8. date of the list, i.e. when the list was put together or revised
5. Handling of inside information
5.1. Legitimate delay of publishing inside information
The Bank, at its own responsibility, is authorised to delay the publishing of inside information to protect the legitimate interests of the Bank, provided that the delay is not likely to mislead the public and the Bank can guarantee the confidentiality of information as stipulated in Art. 6 of Regulations no. 630/2005 on inside information and market fraud.
5.2. Careful handling of inside information
If the Bank exercises the authorisation to delay publication, it or a party acting on its behalf, shall only provide a third party with inside information if it is done in the normal context of the work, position or duties of the provider of the information, and the recipient of the information is bound to observe confidentiality.
When handling data which contains inside information, irrespective of whether the data is stored in written, electronic or other format, care should be taken that outside parties cannot study the information or gain knowledge of the nature of the information.
Parties who possess inside information shall, i.a. used locked cupboards for physical data, control access to computer screens by means of a password and take other measures designed to reduce the likelihood that inside information becomes available to outside parties. The copying of data which contains inside information should be kept to a minimum and copies should be kept with the same care as originals.
5.3. Distribution of inside information
Inside information shall be kept within as limited a group of people as possible. All dissemination of information, irrespective of whether within the Bank or outside the Bank, shall be subject to the approval of the immediate superior to the employee in question. The Compliance Officer shall supervise the distribution of inside information. Otherwise, the Compliance Officer shall be notified at the same time as inside information is distributed, so that the insider list can be updated and sent to the FME and notifications of legal position can be sent to temporary insiders.
Anybody sending inside information to other parties should ensure that the information only reaches the intended recipient. When disseminating inside information it should be ensured that the recipient is bound to observe confidentiality and that the recipient is informed of his or her position as an insider, cf. Art. 4.5.
5.4. Publication of inside information
The Bank is obliged to report immediately all inside information concerning the Bank to the regulated securities market on which its securities are listed. A regulated securities market shall disseminate information pursuant to the first sentence of this article in its information system, and the information will be considered public when it has reached the market.
When inside information has been disseminated publicly pursuant to this article, the Bank shall publish inside information on its website.
6. Insider trading
6.1. Obligation to investigate
Primary insiders are obliged to investigate whether inside information is available or not before trading in securities in the Bank. The same applies to proposed trading in financial instruments which are connected with such securities and proposed trading by parties who are financially connected with primary insiders. Primary insiders are also obliged to notify the Compliance Officer of proposed trading and also after the trading has been completed.
6.2. How primary insiders perform their obligation to investigate
Primary insiders shall perform their obligation to investigate by consulting with the Compliance Officer on the proposed trading, when they perform their obligation to give notification trading. When primary insiders perform their obligation to give notification of proposed trading, cf. Art. 6.3., the Compliance Officer shall advise them on the proposed trading and help the insiders meet their obligation to investigate.
The obligation to investigate shall be performed on the day which trading is proposed. If trading does not take place on that day, the insider shall consult with the Compliance Officer again.
6.3. Obligation to give notification
A primary insider is obliged to inform the Compliance Officer before he or she or a financially connected party trade in securities in the Bank or financial instruments connected to them. After trading has taken place, a primary insider shall inform the Compliance Officer immediately that he or she or a financially connected party has traded in securities in the Bank. The notification from the primary insider shall inform the Compliance Officer of the points which must be included in an announcement on trading by insiders and managers to the FME and, according to circumstances, the market on which the securities are listed.
7. Notification by the Bank of insider trading
The Bank shall send notification of trading by primary insiders and financially connected parties to the FME on the same day. If the primary insider in question is also a manager in accordance with the definition of paragraph 3, article 64 of Act no. 33/2003, the Bank is also obliged to send immediately notification of trading by the primary insider or a financially connected party to the market on which the securities are listed or on which listing has been sought.
The notification of insider trading to the FME should specify the following:
1. Name of the Bank,
2. Date of notification,
3. Name of the primary insider, or financially connected party if applicable,
4. Connection of the primary insider with the Bank,
5. Date of trading and the time of day when trading took place,
6. Type of financial instrument,
7. Whether trading involved buying or selling,
8. Nominal value and price in trading,
9. Nominal value of primary insider's holding or holding of financially connected party after trading
10. Date of final settlement of trading, if applicable
8. Position and role of Compliance Officer
8.1. Appointment of Compliance Officer and his position
The Board of Directors of the Bank is responsible for supervising compliance with these rules. The Board of Directors shall employ a Compliance Officer or formally confirm the appointment of such. If the Compliance Officer is not appointed by the Board of Directors, his or her appointment is not considered valid until confirmed by the Board of Directors. A deputy to the Compliance Officer shall be appointed in the same way. The Compliance Officer shall have access to the data and information considered necessary to be able to perform his or her duties. The Compliance Officer shall be independent in his or her work.
8.2. General provisions on the role of the Compliance Officer
The Compliance Officer supervises compliance with these rules within the Bank and he or she shall submit to the Board of Directors a report on compliance as often as deemed necessary, but no less than annually.
The Compliance Officer shall regularly provide the Board of Directors of the Bank with an overview of his work at least once a year. Such an overview shall state whether the rules have been presented to employees, how many notifications of trading have been received by the Compliance Officer, whether any trading has taken place without obligations to investigate or notify have been performed and how many requests for trading were refused.
8.3. Insider lists
The Compliance Officer shall be responsible for compiling, maintaining and sending lists of insiders pursuant to the requirements of section 4. The Compliance Officer shall be responsible for sending notification of the legal position of insiders and notification of the removal from the lists of insiders. After inside information has been disseminated, lists of insiders must be updated and notification sent to the FME and the market.
8.4. Execution of insider trading / advice from Compliance Officer
When an insider consults with the Compliance Officer on trading to meet the obligation to investigate, the Compliance Officer shall ascertain that no inside information is available within the Bank before advice is given. If inside information is available, the Compliance Officer shall recommend against the insider trading and shall inform the insider that if he or she nevertheless trades that the Compliance Officer is obliged to notify such trading to the FME and that such trading may represent a violation of the law.
When the Compliance Officer or financially connected parties intend to trade, he or she shall consult with the deputy Compliance Officer to perform the obligation to give notification and to investigate.
The Bank itself is considered a primary insider and shall comply with the same rules as apply to primary insiders before the Bank's trading in own shares takes place.
8.5. Recording communications
The Compliance Officer shall keep a record of its communications with the Bank's insiders which take place on the basis of the rules. A record of these communications shall be entered in chronological order in a book with numbered pages, or in an organised manner in electronic form, if it can be ensured that no changes will be made to the record without changes and previous entries being noted.
Entries relating to insider trading, when the insider performs the obligation to investigate and the first part of the obligation to give notification, i.e. notify proposed trading, shall contain the following information:
1. Name of insiders and financially connected parties, if applicable,
2. when (date and time) insider requested advice from the Compliance Officer on trading in securities in the company or connected financial instruments,
3. whether the Compliance Officer considers that inside information is available within the company and whether the Compliance Officer's advice is positive or negative.
When an insider performs the second part of the obligation to give notification, i.e. gives notification after trading has taken place, the points specified in Art. 7 must be reported. Entries by the Compliance Officer in the record of communication shall include this information or a copy of notification to the financial supervisory authority and the market.
When it has been decided, in accordance with Art. 5.1., to delay the publication of inside information on account of the legitimate interests of the Bank, cf. Art. 59 of Act 33/2003 and the provisions of Art. 6 of regulations no. 630/2005 on inside information and market fraud, this shall be noted in the record of communication kept by the Compliance Officer.
8.6. Notification of trading by insiders and managers
The Compliance Officer shall be responsible for notifying the FME on the same day of trading by primary insiders and financially connected parties, cf. Art. 63 of Act no. 33/2003. The Compliance Officer shall also send notification of the trading to the market immediately in the case of trading by managers, cf. Art. 64 of Act no. 33/2003.
8.7. Supervision and notifying the FME
The Compliance Officer shall supervise compliance with these rules. If there is any doubt that the rules have been violated, the Compliance Officer shall report such suspicion to the FME immediately.
8.8. Training and presentations
The Compliance Officer shall be responsible for ensuring that these rules are presented to insiders and that employees of the Bank and others are generally familiar with the rules. He or she shall ensure that the rules on the handling of inside information are accessible to those to whom they apply.
9. Validity
These rules shall take effect upon signing by the Board of Directors of the Bank.
These rules are based on rules in Icelandic from the Icelandic Supervisory Authority. In the event of inconsistency, the Icelandic version shall apply.
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