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.