COMMENTARY: Matti Vanhanen - an insider for the nation?

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By Jyri Raivio
     
      Prime Minister Matti Vanhanen (Centre Party) acknowledged last week, after the bombshell of Stora Enso’s extensive restructuring in Finland and Sweden had been dropped, that he had been officially informed of the planned mill closures the previous evening.
      Stora Enso admitted for their part that the company had not established a project-specific insider register for this streamlining project, as required by the Finnish Securities Markets Act, standards issued by the Financial Supervision Authority, and the OMX Helsinki Exchange Insider Guidelines.
     
If Vanhanen was informed in advance of a forthcoming item of news that could have a bearing on the price of the Stora Enso share, Vanhanen’s name should be included in just such a project-specific insider register.
      The kind of register tha Stora Enso did not in this instance see fit to establish.
     
The lapse does not seem to have troubled Stora Enso unduly, and even less so Vanhanen himself.
      When he briefed Parliament on the matter he commented:
      “There has been a practice, in my view a perfectly sound one, that as Prime Minister I hear from many companies, irrespective of whether the state has a stake in the businesses or not, when they are making decisions that will have a significant impact. Often in these cases the PM is also informed a quarter of an hour or a few hours beforehand. I could say that I have been a real insider in these corporate decisions, and have been so the entire time.”
      In other words, Vanhanen has become an insider for the Finnish nation.
      In many cases this is actually an illegal position as well as being always an awkward one, and one that when one considers the circumstances is completely unnecessary.
     
At the beginning of July 2005, an amendment to the Securities Market Act came into law, containing among other things provisions on the prohibition of unjustified disclosure. Whereas previously it had been illegal to misuse insider information pertaining to a listed company, henceforth even passing on this information became illegal.
      There are no special get-out clauses covering information to prime ministers, presidents, His Holiness the Pope, or the Czar of All the Russias, not even for major stakeholders in the company.
      Vanhanen’s position as Insider of All Finland can cause problems.
      Nobody is about to suspect Matti Vanhanen of having used the information he received some fourteen hours early for his own stock trading or that of those close to him, but who knows who else the Prime Minister has informed about the matter?
      His political assistants?
      Other government ministers?
      The Provincial Governor in one of the affected areas?
      A city manager, perhaps, and through the city manager the local head of business development?
     
Insider information can travel very quickly, which materially increases the danger of its being misused, particularly in the case of companies where the stock is traded on other bourses besides that in Helsinki.
      Then again, it is hard to understand exactly why the Prime Minister should receive the information before others.
      Certainly it is true that rapid actions are necessary to lessen the problems caused by downsizing or closures, but Vanhanen could hardly have had the opportunity to launch the required measures between 19:30 on the evening of Wednesday October 24th (when he was informed) and 9:09 on the morning of Thursday October 25th (when the Stora Enso stock exchange release was published).
      And even if he had been able to pull this off, in so doing he would quite clearly have been obliged to pass on information - the disclosure of which was subject to binding legal restraints - to a whole host of people whose names would have had to be listed on Stora Enso’s non-existent project-specific insider register.
     
Many readers may consider all the above to be hair-splitting and a waste of time.
      It is not.
      In a good many other countries the Stora Enso case would have blown up into an intercontinental scandal.
      The late Jussi Linnamo (1924-2004), Finland’s first market watchdog and the Director-General of the Bank Inspectorate, the forerunner of the present Financial Supervision Authority, said once that you could not carry on stock market activities using the rules of the pleasure beach.
      Parties like Stora Enso and the Prime Minister of Finland should be deadly serious in their attitude to the regulation of stock exchange trading.
     
Helsingin Sanomat / First published in print 1.11.2007


Previously in HS International Edition:
  Stora Enso to shut down two factories in Finland and one in Sweden - 1,400 jobs to go (25.10.2007)
  Minister says government is not to intervene in Stora Enso closures (6.11.2007)
  Finnish government allocates funds to areas hit by Stora Enso closures (26.10.2007)

JYRI RAIVIO / Helsingin Sanomat
jyri.raivio@hs.fi