The Securities Litigation Review: Denmark
i Sources of law
The Danish regulation of securities law is highly influenced by Denmark's membership of the European Union and is based on implementation and direct application of EU regulations such as the MiFID II Directive, the MiFIR Regulation and the Market Abuse Regulation (MAR).2 The primary source of securities law in Denmark is the Capital Markets Act, which came into force on 3 January 2018 and replaced the former Securities Trading Act enacted in 1995. The Capital Markets Act provides the overall framework for securities trading in Denmark, including rules on offering and admission to trading (prospectus rules), disclosure of inside information and takeover bids. The Capital Markets Act is supplemented by a number of executive orders and guidelines providing a more detailed regulation of specific topics. Other potentially relevant statutes include the Companies Act and the Financial Business Act.
In addition, trading at the Danish stock exchange, Nasdaq Copenhagen A/S (Nasdaq Copenhagen), is governed by the Issuer Rules, the Member Rules and the Warrant Rulebook. Litigation of securities claims in Danish courts is not governed by a special set of procedural rules but by the general rules of civil and criminal procedure in the Administration of Justice Act (AJA). In practice, many securities actions start out with the Danish Financial Supervisory Authority (the Danish FSA) or Nasdaq Copenhagen issuing criticism on the basis of inquiries into potential issues. Such administrative orders or reprimands influence the dynamics of court cases. See Section III.
ii Regulatory authorities
The Danish Financial Supervisory Authority
The Danish FSA exercises unitary supervision of the actors in the financial markets in Denmark and ensures observance of the Capital Markets Act and rules issued pursuant thereto.3 In addition to its supervisory activities, the Danish FSA assists in drafting financial legislation and issues executive orders about the financial markets.
Nasdaq Copenhagen A/S
The Copenhagen Securities Exchange began trading in 1808 as a non-profit organisation. Today, the stock exchange exists in the form of the regulated market Nasdaq Copenhagen, which is the predominant stock exchange in Denmark.
Nasdaq Copenhagen also operates First North, an alternative marketplace in Denmark for small and medium-sized growth companies seeking to develop their businesses. First North is subject to a separate and less burdensome rule book.
As of March 2022, 129 companies were listed on the main market of Nasdaq Copenhagen, and 54 companies were listed on First North.
There are no specialist courts in Denmark dealing only with securities litigation. On the contrary, the Danish courts have jurisdiction over both civil and criminal securities actions. The Danish courts include:
- 24 district courts;
- the Maritime and Commercial High Court (a specialist court within the field of maritime, commercial and business law);
- the Eastern High Court and the Western High Court; and
- the Supreme Court.
As a general rule, civil and criminal cases are tried before a district court in the first instance. Only if a case raises issues of a fundamental nature, may it be referred from a district court to the High Court in the first instance.
Court decisions may always be tried in two instances (the two-tier principle).4 Bringing a case before the Danish Supreme Court in the third instance requires permission by the Appeals Permission Board (third-tier grant), which is only granted in cases that may have implications for rulings in other cases or cases of special interest to the public.
The Prosecution Service
The Prosecution Service is the prosecution authority with respect to criminal enforcement of securities law. There are 14 police districts in Denmark, including the Faroe Islands Police and the Greenland Police, where prosecutors appear before the district courts. Cases about serious economic crime are prosecuted in the High Court by the State Prosecutor for Serious Economic and International Crime.
iii Common securities claims
Private securities actions, as described in Section II.i, include actions in which investors are seeking damages for misleading or untrue statements in prospectuses or in other published information and actions about unjustified delay of disclosure of inside information. Such claims are typically directed at the issuer, the management or the board of directors; however, to some extent Danish case law also allows secondary liability as described further in Section II.i.
Within public enforcement and under the Danish FSA's supervision, criminal market misconduct offences include:
- insider trading;5
- unlawful disclosure of inside information;6
- market manipulation;7
- breach of disclosure rules;8 and
- violation of prospectus rules.9
Furthermore, the application of MAR has resulted in increased formal requirements on the keeping and maintenance of insider lists and on documentation of notification of insiders and related parties,10 which the Danish FSA also supervises.
i Forms of action
Article 6(1) of the Prospectus Regulation sets out the fundamental requirement that a prospectus must include the information necessary to enable investors to make an informed assessment of the issuer and the rights attached to the securities.
The cause of action available to an investor seeking damages for misleading or untrue statements in prospectuses has been established by the Danish courts on the basis of the general Danish rule of non-contractual liability (culpa liability).
According to Danish case law, in particular the Danish Supreme Court judgment in Hafnia11 and the Danish Supreme Court judgment in BankTrelleborg,12 persons responsible for a prospectus may incur liability for investor losses caused by defects in the prospectus that, overall, are of significant importance to an investor's assessment of the issuer. It is further required that the defects are attributable to those responsible for the prospectus and that those responsible acted intentionally or negligently.
With regard to causal nexus between the material defects in the prospectus and the loss suffered, the Danish Supreme Court established in BankTrelleborg that when a prospectus suffers from material defects, there is a presumption that the share subscription process would not have taken place, had the information in the prospectus been correct and adequate.13 BankTrelleborg thus places the burden of proof as to causal nexus in cases about prospectus liability on the defendant.
The group of persons responsible for a prospectus naturally includes the issuer and the persons listed in the prospectus as being responsible. In addition, it is recognised in Danish case law and literature that it is not in itself decisive who is formally held out to be responsible for the prospectus. The crucial question is whether that person has in fact taken part in the offering phase or in the drafting of the prospectus.14 Consequently, based on an assessment of the circumstances in each individual case, the person who takes part in the offering phase as a member of management, investment bank, accountant, lawyer, adviser, owner, etc. may incur liability.
Liability for other published information
MAR, which entered into force in Denmark on 3 July 2016, and the Capital Markets Act (formerly the Securities Trading Act) provide the causes of action for investors seeking recovery of losses suffered as a result of reliance on published information (other than a prospectus), or where published information has been delayed without justification.
Pursuant to MAR Article 17(1), an issuer of securities must inform the public as soon as possible of inside information that directly concerns that issuer. Article 7 defines inside information as information:
- of a precise nature;
- that has not been made public;
- that directly or indirectly concerns the issuer; and
- that, if it were made public, would be likely to have a significant effect on the prices of the financial instruments.
An intermediate step in a protracted process is deemed to be inside information; see MAR Article 7(3).
MAR Article 17(1) introduced a significant change in Danish law, as it replaced the 'reality principle' set out in the then applicable Section 27 of the Securities Trading Act, according to which an issuer was only required to disclose information upon the coming into existence of the relevant circumstance or the occurrence of the relevant event. Thus, under the former rule, inside information about, for example, ongoing negotiations in connection with an acquisition was only to be disclosed when the negotiations led to an actual result. Under MAR, an issuer may instead, in such cases, make use of the possibility of delaying disclosure in MAR Article 17(4).
Pursuant to MAR Article 17(4), an issuer may, on its own responsibility, delay disclosure of inside information if:
- immediate disclosure is likely to prejudice the legitimate interests of the issuer or emission allowance market participant;
- delay of disclosure is not likely to mislead the public; and
- the issuer or emission allowance market participant is able to ensure the confidentiality of that information.
The Danish FSA must be informed immediately after the disclosure of inside information when the disclosure has been delayed, and the issuer must give the Danish FSA a written explanation of how the requirements of delay were met. The issuer should make sure it is able to document its fulfilment of the requirements during the entire period in which the disclosure was delayed.
In Denmark, the procedure in relation to securities actions is set out in the AJA, which governs all aspects of both civil (third book) and criminal (fourth book) proceedings.
Civil court proceedings in Denmark are divided into two stages: written pretrial preparation; and trial hearing in court.
Proceedings are commenced by the filing of a writ of summons.15 Since 2 February 2018, all civil cases, including Supreme Court cases, are instituted and processed using a digital portal16 made available by the courts.17
Subsequently, the defendant files a statement of defence before a date determined by the court. After having received the statement of defence, the court will arrange for a pretrial hearing, which will usually be held as a telephone conference.18 At this point, the parties will be expected to agree on a timeline for the remaining case preparation and, if possible, set a trial date. In complex cases, there will usually be a need for further exchange of pleadings and possibly expert reports before the trial hearing.
The pretrial process outlines the scope of the case. If a party wishes to expand the claim, to make new submissions or to produce new evidence after the pretrial process, this may only be done with the permission of the court.19 There is no general obligation of disclosure or discovery as known in common law jurisdictions. However, upon request from a party and in limited circumstances, the court may order a party or a third party to produce specific evidence, such as documents.20
The trial hearing is conducted orally. As a general rule, depositions are not used under Danish law. A party intending to rely on a witness statement must, therefore, call the witness before the court.
The costs connected with a civil action in Denmark are:
- court fees;
- litigation costs, including, inter alia, witness compensation and expenses for expert opinions and translations; and
- costs for legal counsel.
Pursuant to the general rule in AJA, Section 312, the unsuccessful party must compensate the prevailing party for the costs incurred as a result of the action. However, such reimbursement is determined by the court and generally only covers part of the actual costs incurred. Litigants must, therefore, typically be prepared to pay a significant part of their own legal costs, including when succeeding in their claim.
Since 2008, Danish procedural law has allowed group litigation, which is commonly used by investors seeking recovery of losses.21
As in other jurisdictions, parties to Danish court proceedings have a duty to examine the possibilities for a settlement.22 The parties can choose to settle the case proceedings at any point by entering into a settlement agreement. The parties may decide to have the settlement confirmed by the court by way of a court settlement, which is entered in the court records and is enforceable without further formality.
iv Damages and remedies
Under the general law of damages in Denmark, an investor is entitled to be compensated in full so that the investor is restored to the position in which the investor would have been, had the purchase of shares not taken place.
Damages are calculated based on the following three fundamental principles:
- a principle of restitution, meaning that the injured party is to be fully compensated for his or her loss;
- the injured party should obtain no enrichment from the damages; and
- the injured party has a duty to mitigate his or her loss.23
Except for particular statutory provisions, Danish law does not allow punitive damages or compensation without actual loss.
i Forms of action
The Danish FSA has extensive supervisory powers, which include authorisation and supervision of financial companies, on-site inspections and overall monitoring of financial companies' compliance with the capital markets regulation.
An investigation by the Danish FSA often begins with the Danish FSA sending a consultation letter to the financial company with a view to uncovering relevant facts. Ultimately, an investigation by the Danish FSA may result in the Danish FSA issuing an order or a reprimand, but the case may also be closed, either after consultation with the financial company or with some criticism of the company. At other times, the violation is so serious that the Danish FSA files a police report.
As a general rule, the Danish FSA is obligated to publish its decisions.24 Police reports are an exception as they are often confidential due to the ongoing investigation. Both private and public enforcement of securities claims will often be influenced by any initial inquiries, orders or reprimands made or issued by the Danish FSA.
The Danish FSA prepares statistics of market misconduct offences. The table below outlines, as examples, statistics on market abuse, violation of prospectus regulation and unlawful disclosure of inside information.25
|Police reports forwarded to the public prosecutor||3||3||2|
|Police reports forwarded to the public prosecutor*||1||3||7|
|Violation of prospectus regulation|
|Reprimands and orders||0||0||0||0||0|
|Police reports forwarded to the public prosecutor*||0||0||1||0||0|
|Unlawful disclosure of inside information|
|Reprimands and orders||4||10||3||1||2|
|Police reports forwarded to the public prosecutor*||1||1||0||0||0|
|* Several police reports may be included in one case|
With respect to the increase in potential market manipulation cases, Deputy Director Anders Balling, who heads the Danish FSA's office for capital market analysis, has said that the increase is likely to be caused by strengthened market surveillance in the banks.26
Nasdaq Copenhagen supervises and imposes sanctions for violations of its rule books.
When the police have completed an investigation, the Prosecution Service will decide whether to bring formal charges, which depends on whether there is sufficient evidence to convict the provisionally charged person. When formal charges are brought, the case is sent to the court along with an indictment listing the charges.
In Denmark, a case concerned with serious economic crime (e.g., proceedings regarding non-compliance with securities regulation) is, as a general rule, processed according to the same rules as any other criminal case. Therefore, the differences between Danish civil and criminal securities proceedings are worth noting.
In criminal proceedings, counsel for the defence may, before the trial hearing, request the police to conduct investigative actions that the defence finds relevant: for example, questioning of witnesses or technical analyses. However, if the police do not find such investigative actions relevant to the case, it will be for the court to decide whether to allow the request.
As a general rule, counsel for the defence has a right to receive all case material gathered by the police. The person charged is allowed to review the material but may only receive a copy with the police's permission.
In criminal proceedings, there is no written pretrial preparation as in civil proceedings. Although it is allowed to do so, the defence is not expected to produce any written submissions. For these reasons, the procedural features of criminal securities actions differ significantly from civil securities actions, which, inter alia, usually involve an extensive exchange of written pleadings. Critics suggest that Danish criminal procedure is, to some extent, inept in its processing of comprehensive cases against financial companies about non-compliance with securities law.
When initiating an investigation, the Danish FSA will typically enter into a dialogue with the financial company subject to investigation, and the company will be given the opportunity to disclose relevant information. Neither settlements in criminal proceedings nor settlements of administrative actions are possible under Danish law.
iv Sentencing and liability
Pursuant to Sections 247 and 249(1) of the Capital Markets Act, non-compliance with Article 6(1) and (2) of the Prospectus Regulation (prospectus requirements) or MAR Articles 17 (disclosure rules) and 18 (insider lists) is punishable by fine. Non-compliance with MAR Articles 14 (prohibition of insider trading and of unlawful disclosure of inside information) and 15 (prohibition of market manipulation) is punishable by a fine or imprisonment for up to one year and six months; see Section 249(2) of the Capital Markets Act. The standard scale of fines is low compared to international standards.
A defendant may be sued in Denmark if the AJA provides the Danish courts with jurisdiction. According to the main rule in AJA, Section 235, proceedings may be initiated in the defendant's home court. For companies, associations and private institutions, the home court is the court for the judicial district in which their main office is located.27 If a main office cannot be located, the home court is the judicial district in which one of the members of management or of the board of directors is resident. Legal proceedings involving a claim for non-contractual damages may be instituted in the court for the judicial district in which the legal wrong was committed.28
If the defendant is domiciled in an EU Member State, jurisdiction is determined in accordance with the Brussels I Regulation.29 With few exceptions, for example, consumer contract cases30 and the rules on exclusive jurisdiction,31 the courts of the Member State in which the defendant is domiciled will have jurisdiction according to the main rule in Article 4(1) of the Brussels I Regulation. Special rules of supplementary jurisdiction apply in matters relating to contractual relationships,32 tort33 or a branch, agency or other establishment.34
Finally, if the defendant is not domiciled in an EU Member State, exceptional jurisdictions may apply. Under AJA, Section 246(3), proceedings may be brought before the Danish courts if the defendant held assets in Denmark at the time when the proceedings were instituted. In principle, this includes any asset of financial value, for example, a negotiable document or a counterclaim that can be established with some certainty.
Year in review
On 5 May 2021 and in a case concerning inside information, the Danish FSA reprimanded the Danish paint company Flügger Group A/S. On 30 September 2020, Flügger received a resignation letter from its CEO but decided to delay disclosure of the information until 12 October 2020. This was done to ensure a sound transition and because uncertainty about the replacement of the CEO and whether the CEO would continue as a board member could potentially harm negotiations about a purchase of shares from Eskaro Group. The Danish FSA found these to be legitimate grounds for a delay of disclosure under MAR Article 17(4), but as the conditions were no longer present after 9 October 2020, Flügger had violated MAR Article 19(4), see Article 19(1), by postponing disclosure as far as until 12 October 2020. On 9 October 2020, Flügger had received a signed severance agreement from the former CEO and also an agreement had been reached about the CEO replacing the vice chairman on the board, who in turn took over the role as CEO. Flügger maintained that, on 9 October 2020, the timing of implementation of the managerial changes was still uncertain and that an announcement had been scheduled for 9am on 12 October 2020. The Danish FSA observed that Flügger could not delay disclosure of inside information to a specific time or until the markets opened.
In the field of sports, the Danish FSA issued a reprimand on 18 May 2021 to the Danish football club Aalborg Boldspilklub A/S (AaB) for not having disclosed inside information regarding the sale of a player to FC København A/S (FCK). From 14 January to 19 January 2020, there were ongoing negotiations between the two clubs, including by way of text messaging. AaB's board of directors approved the sale on 21 January 2020 and a transfer agreement was signed on 22 January 2020. The agreement was conditional upon the player's acceptance of personal terms, which the player accepted on 24 January 2020, and the same day AaB disclosed the information to the market. In its decision, the Danish FSA emphasised, as also described in Section II.i, that a financial company is not only required to disclose information upon the occurrence of the relevant event, but the decisive factor is whether there is an actual possibility that the event will occur. While it had been legitimate to delay disclosure during the ongoing negotiations, the Danish FSA found that by waiting as long as until 24 January 2020, AaB had violated the disclosure requirements under MAR Article 17(1). Further, AaB was reprimanded for not having drawn up an insider list, as required under MAR Article 18(1), concerning the inside information about the sale of the player.
Within the private enforcement area, attention remained, throughout 2021, on the number of actions involving the former Danish company OW Bunker A/S, which was once one of the world's largest traders of bunker oil. At the public offering in March 2014, OW Bunker earned a market capitalisation of approximately 5.3 billion kroner, but the company filed for bankruptcy in November the same year after suffering risk management losses (approximately US$150 million) and credit losses in a Singapore-based subsidiary (approximately US$125 million).
Currently, there is a bundle of pending private enforcement actions relating to OW Bunker that have been initiated by:
- a consortium of Danish institutional investors pursuing, in two separate actions, claims for prospectus liability (the Prospectus Liability case) and for violation of disclosure requirements;
- a consortium of Danish private investors (Foreningen OW Bunker-Investor) (the consortium has been granted free legal aid under the rules in AJA, Part 31, meaning that the legal proceedings will be financed by the Danish government);
- a consortium of primarily foreign institutional investors led by the Deminor Group;
- the bankruptcy estate itself; and
- the former owner of OW Bunker (the private equity fund Altor) and former members of OW Bunker's management pursuing a claim against Deloitte in Singapore, which was the accounting firm of OW Bunker's Singapore-based subsidiary.
Adding to these cases is an appeal of a decision from the Disciplinary Board on Auditors. In its decision of 8 July 2020, the Disciplinary Board imposed two fines of 50,000 kroner each on two Danish auditors concerning, among other counts, their auditing work on OW Bunker's annual report of 2013. Subsequently, in its decision of 31 August 2020, the Disciplinary Board imposed additional fines of 50,000 kroner on each auditor with reference to 11 counts concerning their auditing work for OW Bunker as well as related companies leading up to the public offering in March 2014. The latter case was appealed by the auditors under Section 52a of the Danish Audit Act, but, on 15 February 2022, the District Court of Lyngby upheld the decision of the Board on Auditors.
In the Prospectus Liability case, institutional investors claim damages of 767 million kroner in compensation for losses suffered as a result of the investment in shares in OW Bunker in connection with the initial public offering (IPO). The plaintiffs mainly argue that the OW Bunker Offering Circular of 18 March 2014 suffered from material defects as it provided incorrect, incomplete and misleading information and omitted information, primarily about the company's speculation in oil price changes and the trading activity between OW Bunker's Singapore-based subsidiary and its customer. The defendants in the Prospectus Liability case include the bankruptcy estate, the board of directors, the day-to-day management, the ultimate owner and private equity fund, and also two of the four investment banks organising the IPO.
Owing to their fundamental nature, the pending OW Bunker cases (listed in (a)–(d) above) have been referred from a district court to the Eastern High Court in the first instance. Interestingly, the Eastern High Court has directed, in accordance with AJA, Section 254, that all of the OW Bunker cases pending before the High Court are to be heard jointly. This is likely to impact the processing of the cases, as the cases will now be tried at one joint trial hearing. This naturally has certain advantages but is also likely to result in practical challenges considering the high number of plaintiffs, defendants and lawyers, as well as the differences in applicable areas of law. The OW Bunker cases have been on hold pending the High Court's ruling on requests for expert surveys and valuation. Although the first proceedings were commenced in April 2016, trial dates for the joint oral hearing have not yet been set.
Adding to the procedural complexity of the OW Bunker cases are recent developments with respect to the legal actions filed by the OW Bunker bankruptcy estate. In December 2016, the bankruptcy estate filed its first legal action claiming damages for 400 million kroner, which partly covered a claim for recovery of paid dividends and partly a claim for damages. In October 2017, the bankruptcy estate filed two additional legal actions claiming 800 million kroner and 1 billion kroner, respectively, concerning the same matters and against the same defendants whereby it raised its total claim to approximately 2.2 billion kroner. The additional two legal actions were made possible by way of a litigation funding agreement between the bankruptcy estate and a hedge fund. This prompted the defendants to argue for a dismissal, as the new legal actions, according to the defendants, concerned identical proceedings. In March 2020 and April 2021, respectively, the Eastern High Court ruled in favour of a dismissal by applying a strict lis pendens rule. The bankruptcy estate appealed the judgment concerning the additional claim of 1 billion kroner, but lost in the Supreme Court on 22 March 2022 (see Section VI).
Moving on from the OW Bunker cases, there was also a great deal of other activity before the Danish courts within the area of securities law in 2021.
Another case not yet heard in court is the appeal of the civil litigation brought by the bankruptcy estate of the former Danish lighting company Hesalight A/S against the founder and CEO, three former members of the company's board of directors and the company's auditor. In its judgment of 31 March 2020, the District Court of Roskilde found the former CEO, two of the former members of the board of directors and the auditor jointly liable to pay damages in the amount of 200 million kroner. The court found that the fact that the investors had not performed their own due diligence before investing in Hesalight did not exclude civil liability, as the management had known that the institutional investors had relied upon the information in the company's annual accounts, including the information that the annual accounts were audited by a state-authorised public accountant. The Hesalight case is pending before the Eastern High Court in the second instance with the oral hearing scheduled for November and December 2022 and January 2023.
At the beginning of 2019, a number of Danish and international investors filed class actions against Danske Bank and certain individuals for the purpose of seeking damages for share price declines and violation of disclosure requirements following the money laundering case relating to the bank's Estonian branch. There are seven class actions pending before the Danish courts. At the moment the class actions are pending the outcome of a series of test cases before the Eastern High Court for which the oral hearing is yet to be scheduled.
Also, during 2021, the Danish greentech company Green Impact Ventures (formerly Waturu Holding A/S) attracted attention. In 2019, the company announced its development of a unique and environmentally sound water heater. As a way of raising capital for production, the company became listed on First North in May 2019. In December 2020, Nasdaq intervened and suspended trading due to serious concerns about the company's potential violation of the requirements for trading on First North. At the beginning of 2021. according to media reports, a group of investors were examining whether to file legal action against Green Impact Ventures with a view to seeking damages for breach of disclosure requirements. The investors refer to production still not being commenced as of February 2021, despite the company having successfully raised capital.35 Based on the findings of an investigation conducted by Nasdaq, Green Impact Ventures was removed from First North on 17 September 2021.36 Later that year, bankruptcy proceedings were commenced against the company which, according to the bankruptcy trustee, were a result of a claim for 500,00037 kroner. At the moment, there is no public information as to the status of the potential litigation.
Outlook and conclusions
During 2021, the Danish courts were forced to limit their capacity as covid-19 guidelines required, among other things, participants to maintain a distance of two metres. As of 1 February 2022, covid-19 is no longer categorised as a disease presenting a critical threat to society in Denmark and covid-19 restrictions have been lifted across the country, including in the Danish courts. However, according to the director of the Danish Court Administration, covid-19 has caused a delay in the processing of court cases, thus the aftermath of covid-19 is still to come.38
At the time of writing, our thoughts are overshadowed by the war in Ukraine, which means volatility on the stock markets around the world. In Denmark, Danish companies with connections to Russia are checking whether they are acting in violation of sanctions while at the same time considering whether they can ethically cooperate with Russia – now and in the long run without the risk of jeopardising their reputation. While it is not yet possible to guess the legal implications of this development, it is likely to result in changed outlook and disclosure for some Danish companies and investors.
Looking back at the OW Bunker cases described in Section V, these are likely to be finally tried and decided by the Danish Supreme Court and will make for landmark decisions in that they deal with relatively untested areas of securities law and also raise significant procedural questions. The prospectus liability cases will test the requirements for and the balance between the business description and risk factors in a prospectus, as well as the significance of the pre-IPO process. The outcome of the cases will also have an impact on future litigation concerning the potential liability of investment banks in connection with public offerings.
With respect to the legal actions filed by the OW Bunker bankruptcy estate (see Section V), the ruling from the Supreme Court on 22 March 2022 marks a critical point. It has resulted in the bankruptcy estate forfeiting its additional claim of 1 billion kroner. As regards the additional claim of 800 million kroner, the bankruptcy estate has instead attempted to raise its claim in the first legal action from 2016 by referring to a reservation presented in its writ of summons. On the other side, the defendants claim that such an increase is now time-barred, and that the bankruptcy estate, despite the reservation, has lost the possibility of raising its claim because, instead of raising the claim, the estate first chose to initiate the two additional legal actions against them, which the Eastern High Court and Supreme Court have since dismissed. The Eastern High Court will rule on this matter in April 2022.
On the subject of risk factors in prospectuses, new rules came into force with the Prospectus Regulation in 2019, which in Article 16(1) sets out that risk factors must be limited to risks that are 'specific to the issuer and/or to the securities' and that are 'material for taking an informed investment decision'. The underlying objective was, inter alia, to change the fact that risk factors in prospectuses had become long and generic and thus had the look of disclaimers. In brand-new guidance issued on 3 November 2021, the Danish FSA raises awareness about the need for a clear and direct link between the risk factor and the issuer. If there is no such link, the risk factor is not specific. Further, there must be a clear explanation as to why the risk factor is material. The guidance, which includes some examples, provides something for issuers to lean against when drafting risk factors going forward.39
Finally, a new case, which both investors and legal practitioners are likely to keep an eye on in 2022, concerns suspected insider trading. On 25 January 2022, the Danish public prosecutor charged a former senior executive of a company listed on Nasdaq Copenhagen with violation of the prohibition of insider dealing under MAR Article 14. According to the public prosecutor, the former senior executive had used inside information about a possible cancellation of a product launch, while selling shares for approximately 2.2 million kroner in May 2019. It is the view of the public prosecutor that, prior to the sale, the senior executive had obtained information about negative test results relating to the forthcoming product launch. The public prosecutor further states that the information, if made public, would have been likely to have a significant effect on the company's stock price.40
1 Karsten Kristoffersen is a partner and Josefine Movin Østergaard is a senior manager at Bruun & Hjejle. The authors wish to thank Josefine Krog-Pedersen for her assistance in producing this chapter.
2 Markets in Financial Instruments Directive (EU) No. 65/2014, Markets in Financial Instruments Regulation (EU) No. 600/2014 and Market Abuse Regulation (EU) No. 596/2014.
3 The Capital Markets Act, Section 211.
4 AJA, Part 36 on appeals.
5 MAR Articles 8 and 14.
6 MAR Articles 10 and 14.
7 MAR Articles 12 and 15.
8 MAR Articles 7 and 17.
9 The Prospectus Regulation Article 6.
10 MAR Article 18.
11 Reported in the Danish Weekly Law Reports for 2002 – UfR 2002.2067 H.
12 Reported in the Danish Weekly Law Reports for 2013 – UfR 2013.1107 H.
13 Supreme Court judgment as reported in the Danish Weekly Law Reports for 2013 – UfR 2013.1107.H, Paragraph 1145.
14 Peer Schaumburg-Müller and Erik Werlauff 'Ansvar for børsemission', article published in the Danish Weekly Law Reports for 1997 (UfR 1997.456.B), p. 460.
15 AJA, Section 348.
17 AJA, Sections 148a–148b.
18 AJA, Section 353.
19 AJA, Section 358.
20 AJA, Section 298.
21 AJA, Section 254a.
22 AJA, Section 336a.
23 Bent Iversen and Lars Lindencrone Petersen, Danish Business Law, 6th Edition (2015), p. 115.
24 The Capital Markets Act, Section 234, subject to limitations in the Capital Markets Act, Sections 237–239.
25 Statistics provided by the Danish FSA (latest update 2 March 2022). Available at: https://www.finanstilsynet.dk/Tal-og-Fakta/Statistik/Statistik-for-overtraedelser-af-regler-paa-kapitalmarkedet, accessed on 2 March 2022.
27 AJA, Section 238.
28 AJA, Section 243.
29 Regulation (EU) No. 1215/2012 of 12 December 2012.
30 ibid., Articles 17–18.
31 ibid., Article 24.
32 ibid., Article 7(1).
33 ibid., Article 7(2).
34 ibid., Article 7(5).