Swedish regulator fines Nordnet for intraday short selling violations
26 May 2022 Sweden
Image: AdobeStock/Nuthawut
Finansinspektionen (FI), the Swedish financial services regulator, has fined Nordnet for failing to adhere to its terms of service relating to intraday short selling.
FI indicates that online broker and banking services provider Nordnet has offered to a small group of customers a wider range of shortable shares than is available to its wider customer base.
In offering this privileged service, available to Nordnet鈥檚 most active customers and those with larger capital amounts to invest, the financial watchdog finds that Nordnet failed to ensure adequate stock borrow was available before allowing these customers to short the stock.
This presented risk that the customers were short selling shares without adequate coverage, FI finds, causing it to violate rules banning naked short sales in the Nordic jurisdiction. 鈥淥n one occasion it has been determined that naked short selling was widespread,鈥� says FI.
In summarising its evidence against Nordnet, FI says that Nordnet had reported deficiencies in its procedures for intraday short selling in 2018, but the bank had continued to provide this service without taking necessary remedial measures.
FI also identified wider failings in Nordnet鈥檚 internal guidelines, procedures, risk management and risk assessment, as well as failing to fulfil its duty of care to customers.
Commenting on the case, FI鈥檚 deputy director general Susanna Grufman says that 鈥淣ordnet鈥檚 actions can have a negative impact on the confidence that the market is well functioning.鈥�
FI鈥檚 decision, which was finalised by its Board of Directors on 24 May, has resulted in 鈥渁 remark鈥�, or censure, and a SEK100 million (approximately US$10 million) fine for the online bank and broker.
FI indicates that online broker and banking services provider Nordnet has offered to a small group of customers a wider range of shortable shares than is available to its wider customer base.
In offering this privileged service, available to Nordnet鈥檚 most active customers and those with larger capital amounts to invest, the financial watchdog finds that Nordnet failed to ensure adequate stock borrow was available before allowing these customers to short the stock.
This presented risk that the customers were short selling shares without adequate coverage, FI finds, causing it to violate rules banning naked short sales in the Nordic jurisdiction. 鈥淥n one occasion it has been determined that naked short selling was widespread,鈥� says FI.
In summarising its evidence against Nordnet, FI says that Nordnet had reported deficiencies in its procedures for intraday short selling in 2018, but the bank had continued to provide this service without taking necessary remedial measures.
FI also identified wider failings in Nordnet鈥檚 internal guidelines, procedures, risk management and risk assessment, as well as failing to fulfil its duty of care to customers.
Commenting on the case, FI鈥檚 deputy director general Susanna Grufman says that 鈥淣ordnet鈥檚 actions can have a negative impact on the confidence that the market is well functioning.鈥�
FI鈥檚 decision, which was finalised by its Board of Directors on 24 May, has resulted in 鈥渁 remark鈥�, or censure, and a SEK100 million (approximately US$10 million) fine for the online bank and broker.
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