- OMX Nordic Exchange Iceland hf. imposes monetary sanction on Nýsi hf.

OMX Nordic Exchange Iceland hf. (“OMX ICE”) has decided to publicly reprimand
Nýsir hf. (“the issuer”, “the company”) and impose a monetary sanction on the
company in the amount of ISK 1,500,000 owing to incidents where the issuer is
found to have violated provisions of the Rules for Issuers of Financial
Instruments Admitted to Trading on OMX ICE (“the OMX ICE Rules”). The issuer is
deemed to have been in breach of provisions 4.1.3, 4.1.4, 4.2.1 and 4.2.2
(4.2.3)  of the Rules by the conduct outlined below (On 1 July 2008, new Rules
for Issuers of Financial Instruments Admitted to Trading on OMX ICE took
effect. The provisions referred to herein are equivalent to the corresponding
provisions of the previous Rules, for which reason reference is made within
parentheses to the older provisions when their numbering has been amended). 

Circumstances of the case

On 2 April 2008, the issuer published an announcement on its 2007 annual
financial statements. Among other things, the announcement stated that the
company's board of directors had concluded an agreement with the Icelandic bank
Landsbanki Íslands hf. on assistance with the sale of assets, the raising of
new share capital and loan restructuring in order to ensure the progress of
projects under development by the company. In Note 30 of the financial
statements it was further stated that the board had full confidence and comfort
in the execution of the financial restructuring plan. However, the
qualification was made that, should the company's restructuring not
materialize, for whatever reasons, this could cause material uncertainty
regarding the company' future. 

In mid-June 2008, the media published reports about the difficult financial
position of Nýsir hf. and the intended refinancing and restructuring of the
company's finances, including in relation to defaulting payments on the
company's securities traded on OMX ICE. Subsequently, OMX ICE requested the
company to issue a public announcement on the measures thus referred to and the
company's position regarding the settlement of securities traded on OMX ICE.
The company issued an announcement on 18 June stating that, on the basis of an
agreement with the holders of the company's marketable securities maturing in
March and April, discussions had taken place on the settlement of the
liabilities, with the company aiming to reach a conclusion within a few weeks.
The announcement further stated that an agreement was planned with the holders
of the company's three other series of securities traded on OMX ICE. 

Nýsir hf.'s NYSI 03 1 bond matured on 17 July. OMX ICE again requested an
announcement by the company, as the previous announcement was found not to have
met issuers' disclosure requirements by failing to disclose delays that were
clearly impending in payments on securities series traded on OMX ICE. The
company made a public announcement on 22 July stating, among other things, that
the company's full restructuring would take a longer time and that payments
would be delayed until the completion of the restructuring. 

Provisions of the OMX ICE Rules

Under provision 4.2.1 of the OMX ICE Rules, an issuer must make every effort to
make public without delay previously unpublished information on decisions or
events that it knew or should have known would have a significant impact on the
market value of its bonds. Provision 4.2.2 (4.2.3) further states that
notification shall be given of all decisions or events relating to the rights
of bond holders. The explanatory notes accompanying the provision state, inter
alia, that this may involve aspects such as delays of payments on principal
and/or interest. Provision 4.1.3 states that an issuer must ensure equal
treatment of investors concerning access to information covered by the Rules,
and treat and store information so as to ensure that unauthorised persons do
not have access to such information before it is made public. All information
covered by the Rules must be disclosed immediately or as quickly as possible,
cf. provision 4.1.4. 

Conclusion

The information regarding the issuer's financial position and payment
difficulties is information that the issuer should have known would have a
significant impact on the market value of its bonds, cf. provision 4.2.1 of the
OMX ICE Rules. When it has become evident that an issuer of securities is
unable to meet its commitments under the terms of securities traded on OMX ICE,
e.g. to pay principal and/or interest when due, it is very important to inform
investors that this is the case, cf. provision 4.2.2 (4.2.3) of the OMX ICE
Rules. The general information provided in the announcement, issued on 2 April
2008, on the company's 2007 financial statements regarding its financial
restructuring was inadequate in failing to disclose that payments on securities
issued by the company would be delayed. The requirement must be made of
securities issuers that disclosure of potentially price-sensitive information
is maintained and that announcements already issued are updated in accordance
with new information that emerges. 

It is not only important to safeguard the interests of the holders of
outstanding securities, but also to take into consideration that when such
securities have been admitted to trading on an exchange, it is easy to trade
them. Therefore, potential investors must be informed about the issuer's
financial position and liquidity. Informing only the holders of outstanding
securities about the issuer's financial difficulties and defaults on payments
does not meet the issuer's disclosure requirements. Such selective disclosure
to a limited number of investors is in breach of provisions stipulating equal
access to information that may have a significant impact on the market value of
the issuer's securities, cf. provision 4.1.3. 

An issuer of securities is responsible for ensuring that information that may
have a significant impact on the market price of its securities is disclosed in
accordance with the provisions of the OMX ICE Rules, and that it is not
reported in the media before being made public in a satisfactory manner and in
accordance with the above provisions. Under the aforesaid provisions, the
issuer must disclose such information immediately or as quickly as possible.
Delayed disclosure may cause the information to be disseminated in an
unsatisfactory manner, jeopardising equal investor access to it, cf. provision
4.1.3. 

Nýsir hf. entered into an agreement with OMX ICE on the admission to trading of
its securities. The company thereby undertook to comply with OMX ICE rules on
information disclosure. OMX ICE finds that Nýsir hf. was under obligation to
make public the company's poor financial position and intended restructuring as
soon as it was clear that payments on the issuer's securities traded on OMX ICE
would be delayed. The issuer did not meet its disclosure obligations by
consulting with the holders of the securities. Information of such major
importance must be disclosed in a public announcement. It is also censurable
that price-sensitive information was published in the media before being made
public in a verifiable and correct manner. In light of the circumstances of the
case, and taking due account of the arguments submitted by the issuer, OMX ICE
finds that the issuer's conduct in the cases in question was in breach of
provisions 4.1.3, 4.1.4, 4.2.1 and 4.2.2 (4.2.3) of the Rules for Issuers of
Financial Instruments Listed on OMX ICE. 

Decision to issue public reprimand and impose monetary sanction

OMX ICE publicly reprimands Nýsir hf. and imposes on the company a monetary
sanction amounting to ISK 1,500,000 for the violations set forth above of the
OMX ICE Rules. The decision to issue the public reprimand and impose the
sanction is made on the basis of an agreement between Nýsir hf. and OMX ICE on
the admission of the company's securities to trading on OMX ICE, cf. provision
8.3 of the Rules. Point 4 of the provision states, inter alia, that in cases
where an issuer is in breach of the Rules, OMX ICE may make a public
announcement on the case in question. Point 6 empowers OMX ICE to impose a
disciplinary sanction on the issuer in the form of a monetary penalty.