Nasdaq OMX Iceland (“the Exchange”) has decided to reprimand Kaupthing Bank hf. (“Old Kaupthing”, “Kaupthing”, “the bank”, “the issuer”) publicly in relation to events where the issuer is found to have infringed provisions of the Rules for Issuers of Financial Instruments Listed on Nasdaq OMX Iceland. Kaupthing is considered to have been in breach of Sections 2.1, 2.3 and 2.17 of the Rules by the following conduct. Circumstances of the case On 4 November the newspaper website mbl.is published a report on Kaupthing's loan to the bank's employees for the purchase of shares in the bank. The report stated, among other things, that the bank's board had, in a meeting held on 25 September 2008, decided to cancel its employees' personal guarantees for the loans. Reference was made to this in, among other things, a statement by Kaupthing's former board, which included that, owing to the bank's falling share price and increased funding costs, the board found that it was faced with two options. Either the staff would have to sell their shares and thus pay up the loans, or the bank would have to cancel the remainder of the employee's guarantees of loans for the purchase of shares in the bank. The bank board was furthermore of the view that “had key employees of the bank begun a major sell-off of their shares in the bank, this would, in light of the sensitive state of the financial markets, have compromised the bank's position substantially.” Following the publication in the media of the said statement by the bank's board, the Exchange sent Kaupthing a request for explanations. Clarification was sought as to why Kaupthing did not make public information on the scope of the guarantees cancelled by the bank's decision as well as details of what closely related parties obtained such a cancellation of personal guarantees. Lastly, clarification was requested as to why the information was not disclosed as soon as the board had made the decision. No information has been made public about the board's decision. Conclusion The necessary conclusion is that Kaupthing's board made a decision on 25 September to cancel employees' personal guarantees for loans for the purchase of shares in the bank. Clearly, the board's action was not made public and no information has been accessible to investors, except for the information disclosed in the statement of the bank's former board, which was published in the media, as well as in other media reportage. The cancellation of employees' personal guarantees must be regarded as constituting, among other things, the bank's preferential treatment of closely related parties, e.g. senior officers and other management staff. The Exchange can only deduce that Kaupthing's employees were originally personally responsible for their loans for share purchases. The Exchange is of the view that the said measures, involving a decision to cancel personal guarantees for the bank's loans to employees, including closely related parties, comprise transactions in the understanding of Section 2.17 of the Rules for Issuers of Financial Instruments Listed on Nasdaq OMX Iceland. The cancellation of personal guarantees for loans cannot be considered to be normal business practice, let alone at a time of significant uncertainty as to whether the security pledged covers repayment of the loan. Therefore, Kaupthing must be regarded as having had the duty to make public information on the cancellation of the personal guarantees for loans to closely related parties, as stipulated by Section 2.17 of the Rules for Issuers of Financial Instruments Listed on Nasdaq OMX Iceland. Even supposing that Kaupthing's board was empowered to cancel its employees' personal guarantees, this would not discharge the bank from the duty to make public the decision in accordance with the Rules for Issuers of Financial Instruments Listed on Nasdaq OMX Iceland. Had Kaupthing made public its decision to cancel its employees' personal guarantees, this could have had a significant impact on the bank's share price. This is also supported by the former bank board's statement to the effect that, had the personal guarantees of employees not been cancelled, they would most probably have begun “a major sell-off of their shares” and this would have “in light of the sensitive state of the financial markets, compromised the bank's position substantially”. According to this, the measures were intended to prevent a chain of events that could have damaged the bank's position considerably. Thus, the conclusion must be that information on Kaupthing's decision to cancel its employees' personal guarantees and information on the reason for that decision was likely to be price-sensitive for the bank's share price. Therefore, the Exchange finds that Kaupthing clearly had a duty to make the decision public given that the matter involved price-sensitive information which there was reason to believe could have a significant impact on the market price of the company's shares, cf. Section 2.1 of the Rules for Issuers of Financial Instruments Listed on Nasdaq OMX Iceland. With due regard to investor interests, it is important that all information required to be disclosed under the Exchange's rules is made public as soon as possible and within the time limits stipulated therein. Kaupthing has, by its agreement with the Exchange on the admission of the bank's shares to trading, undertaken to comply with the Exchange's rules on information disclosure. As an issuer of shares listed on the Exchange, Kaupthing is responsible for ensuring that its information disclosure complies with the Exchange's rules. The bank thus has the duty to disclose all information covered by the rules without delay or as soon as possible, cf. Section 2.3 of the Rules for Issuers of Financial Instruments Listed on Nasdaq OMX Iceland. The issuer clearly failed to meet the Rules' disclosure requirements, as the aforesaid information on the board's decision to cancel employees' personal guarantees for loans for the purchase of shares in the bank was not made public as soon as the decision had been made. In light of the circumstances of the case, and with due account of the arguments submitted by Kaupthing, the Exchange finds that the bank's conduct in the case was in breach of provisions 2.1, 2.3 and 2.17 of the Rules for Issuers of Financial Instruments Listed on Nasdaq OMX Iceland. Decision to impose public reprimand The Exchange reprimands Kaupthing publicly for the aforesaid breach of the Exchange's rules. The decision to issue the public reprimand is made on the basis of an agreement between Kaupthing and the Exchange on the admission to trading of the issuer's shares on the Exchange, cf. Section 8.3 of the Exchange's Rules. Point 4 of the Section states, inter alia, that in cases where an issuer is in breach of the Rules, the Exchange may make a public announcement on the case in question.