Insider register will shed light on insurance management holdings

Making the insider register public has come in for criticism. The Confederation for Finnish Industries, in particular, has said that the obligation to publicise share transactions by company insiders would complicate participation on the boards of employment pension companies. The fear is that the measure would take skilled people away from management boards.

Backman believes that there will be sufficient competent members of pension company boards following the introduction of the new legislation. Similar rules are in use elsewhere, and the issue is hardly novel.

"Operations in many investment environments already have experience of declaring shareholdings to insider registers. The rule has also applied to the banking sector, and there haven't been allegations that the boards of banks have found it hard to get members."

In an employment pension company, insiders include board members and deputy members, the CEO and his or her deputies and accountants. Insiders also comprise employment pension company employees who are in a position to influence the company's investment decisions or who otherwise regularly receive insider information.

In future, all those who are insiders would have to disclose their stock market holdings and securities transactions worth more than €5 000. The disclosure obligation on such interests also extends to the shareholdings of the children of insiders.

Critics of the measure say that there is no reason why pension insurance firms' board members should be counted as insiders. They argue that members do no have access to insider information, nor do they take decisions on investments because of their position.

The MSAH views the issue differently. Personnel working with the board of a pensions insurance firm or with its investments can access in the course of company activity key undisclosed information on the price of securities. Merely the possibility of being able to access such information undermines confidence in the securities market.

"Boards wield significant decision-making powers in employment pension companies, which are Finland's largest investors. When the regulation on insiders is extended to employment pension companies, the rules will also apply to company board members."

Employment pension companies control investment assets amounting to nearly a hundred billion euros.

A proposed alternative to the insider register is one that would be project-specific. Backman does not believe that this would be a good solution. A project-specific register would deviate from other investment market legislation. There would have to be a clear reason why such a register would be used.

"Since in all other cases, company boards are counted as insiders, we don't think it would be good if there are lighter rules for employment pension companies. Far from it. Transparency is of crucial importance, because employment pension companies statutorily invest pension funds," says Backman.

"A project-specific register would also not promote transparency in the same way as the permanent insider register that we propose."

Keva, the pensions insurance institution that handles the pensions matters of employees of local government, the state, the Evangelical Lutheran Church and the social insurance institution (Kela), is subject to its own legislation. This is dealt with by the Ministry of Finance, and it is for this reason that the MSAH does not have the authority to draft legislation that covers Keva.

"We don't think there is anything to prevent Keva being covered by the same rules as employment pension companies. I understand that legislation concerning Keva will start to be drafted this autumn by the Ministry of Finance," explains Backman.

She points out that the MSAH draft bill is now ready following a lengthy drafting process, and there are no compelling reasons to prolong the introduction of the new measures.

The government presented the draft bill to parliament on 14 August. Work on drafting the new legislation started in spring 2011, and for a long time was handled on a tripartite negotiating basis, government and labour market organisations. This failed to reach full consensus on the new law.

The draft bill on the insider register was eventually completed because of the importance attached by society to openness and transparency.

"Employment pension companies have much power in society, and it is therefore natural that requirement for openness and expectations for transparency address employment pension companies and their board members, who have decision-making powers. There is also extensive support among the public and political decision-makers for openness and transparency bases of the draft bill."

The new law will come into force at the beginning of 2015, and companies will have until the beginning of June to be on the new insider register.


Text: Kimmo Vainikainen, Mark Waller