NASDAQ OMX Helsinki Disciplinary Committee imposed a warning and a fine of EUR 20,000 to Tectia Corporation for breaching the Rules of the Stock Exchange
Helsinki, January 19, 2012 – The Disciplinary Committee of NASDAQ OMX Helsinki (the “Exchange”) has imposed a warning and a fine of twenty thousand euros (EUR 20,000) to Tectia Corporation (trading code: TEC1V) due to the breach of the Rules of the Stock Exchange.
Tectia Corporation announced in the company’s first quarter interim report on April 20, 2011, that it estimates its net sales 2011 to grow from 2010 and net result to be positive. Tectia Corporation issued a profit warning on July 19, 2011, at 9 am, in which the company estimated its net sales 2011 to grow from 2010 and net result to be negative. The company disclosed its second quarter interim report the following day, on July 20, 2011 at 9 am.
The company issued a second profit warning on October 19, 2011, at 8.50 am, and its third quarter interim report the same day at 9 am. The company estimated in the profit warning its full year net sales 2011 to decrease from 2010 and net result to be negative. As mentioned above, in the previous forecast the company had expected its net sales 2011 to grow from 2010 and net result to be negative.
According to the Rules of the Stock Exchange (Rule 3.1.1), the company shall, without undue delay, disclose information about decisions or other facts and circumstances that are price sensitive. For the purpose of these rules, price sensitive information means information which is expected to materially affect the price of the company’s listed securities, in accordance with the Securities Market Act. Furthermore, pursuant to the rule 3.3.1, when the listed company reasonably expects that its financial result or financial position will deviate significantly from a forecast disclosed by the listed company and such deviation is price sensitive, the listed company shall disclose information about the deviation.
Pursuant to the information provided by the company, the Disciplinary Committee considered the company’s financial reporting and control systems to be appropriate and adequate as such. The monthly sales forecast meetings and the monthly net result and net sales forecast adjustments can be considered to meet the requirements for a duly organized financial control and reporting system.
The net result of the company was negative after the first quarter of the year and the net sales and net result were considerably lower than budgeted estimates in the course of the spring 2011. The Disciplinary Committee considers that the company should have paid special attention to monitoring the financial development in May, at the latest. The company should have noticed that achieving the earlier disclosed yearly forecast had required a considerable growth in net sales and net result towards the end of the year. In addition, the management of the company should have presented arguments for such level of expected growth.
It was not proven by the company that the company’s business would be cyclical in such a manner that it would have been reasonable to rely on the substantially better financial performance during the latter part of the year than during the first part of the year, taken into the account the current international economical trend. For the second profit warning the company presented that anticipated sizable business deals were postponed to a later date. Based on the information provided by the company, the realization of these business deals during the fiscal year 2011 was not sure in a manner that a prudent estimate could be based solely on those sales projections. Furthermore, it was not proven that estimating the net result of the company would be especially difficult due to the nature of the business of the company.
The Disciplinary Committee stated that the level of analyzing and interpreting the results was not adequate despite the reports produced by the company’s sound financial control and reporting systems. Furthermore, the management of the company has not taken actions required due the changes in the financial development of the company without undue delay and in an efficient manner.
The Disciplinary Committee considered based on the report by the company that Tectia Corporation has not taken actions required by the financial position of the company without undue delay. The company should have paid special attention to the development of net sales and net result already in the middle of the second quarter of the year, and the company should have expedited the preparation of the key figures of the financial performance. The Disciplinary Committee observes that the company should have critically reviewed the earlier announced net sales and net result 2011 forecasts already in June, and that the company should have disclosed a company announcement of the forecast deviation.
The Disciplinary Committee found that Tectia Corporation violated the Rules of the Stock Exchange 3.1.1 and 3.3.1 by disclosing profit warnings based on the forecast deviations not until July 19, 2011, and October 19, 2011. Since the breach concerns one of the key disclosure requirements for issuers, the violation has to be deemed serious.
The Disciplinary Committee found the disclosure procedure of Tectia Corporation to be against the Rules of the Stock Exchange and imposed a warning and a fine of EUR 20,000 to the company due to the breach.
NASDAQ OMX Nordic Foundation
Their Disciplinary Committees of NASDAQ OMX Helsinki and NASDAQ OMX Stockholm may, in case of a breach by the member or a listed company, resolve to fine the member or a listed company. The paid fine is transferred to the NASDAQ OMX Nordic Foundation for the promotion of the foundation’s objective, which is to promote scientific research of the financial markets in Finland and Sweden, providing impetus for increased competence and competitiveness for these financial markets. Two of the directors of the Foundation shall have extensive academic experience within the field of financial markets.
Surveillance at NASDAQ OMX Helsinki
The surveillance unit of NASDAQ OMX Helsinki investigates all suspected breaches of regulations. Minor breaches will result in written criticism to 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 NASDAQ OMX Helsinki. 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. Sanctions for a listed company may be a warning, a fine or delisting. For more information about the Disciplinary Committee visit www.nasdaqomx.com/listingcenter.
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