Increasing the transparency in the Norwegian bond market!

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The Ministry of Finance has requested the Norwegian FSA (FSAN) to draft legislation that may allow issuers of bonds to require information about the identity of the bondholders, including bondholders who hold their bonds through nominee accounts. This may increase the transparency in the Norwegian bond market.
Monday, September 14, 2015

While the shareowner register in Norwegian companies is publicly available, bondholders remain anonymous. The lack of transparency in the bond market has been criticised for many years and critics, including Oslo Børs, have claimed that the secrecy increases the risk for insider trading and thereby threatens the market’s integrity. Others have pointed out that the secrecy is an effective hinder against competition, as the investment banks who arranged the bond issue are, together with the trustee, the sole keepers of the identity of the bondholders at the time of the issue. Since most bonds are listed, the arrangers will be able to track the subsequent activity in the secondary market. Due to lack of information, other investment banks are not able to compete with the arrangers in this respect. This is particularly a disadvantage for the smaller investment banks, who rarely act as arrangers.

At this stage, the MoF does not suggest to open up the books completely. Rather, the MoF requests the FSAN to propose legislation that may allow bond issuers to agree upon a right to get access to information about the identity of bondholders from nominees. Issuers of bonds shall themselves decide whether or not such rules shall apply for the bond issue in question. A possible method will be for the issuer to include a right to get access to information as a condition in the terms of the bond issue.

The FSAN is also requested to consider if information about the identity of the bondholders shall be publicly available – for example through the issuer’s website – or, if not, who shall have access to the information and what kind of confidentiality requirements that shall apply to the issuer.

The MoF has stated that it will consider at a later stage whether the identity of bondholders shall be publicly available, even if the issuer has not agreed on such terms.

The FSAN has been given a deadline until 29 February 2016 to draft the white paper and the suggested legislation.

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Lawyers

Martin Brox
Martin Brox
Senior Lawyer
Oslo
T: +47 22 81 45 27
M: +47 952 85 345