Nordnet receives a remark and an administrative fine

2022-05-25 | News Consumer Insurance Bank

Finansinspektionen (FI) is issuing Nordnet Bank AB a remark for violations related to the bank's intraday short selling service. Nordnet must also pay an administrative fine of SEK 100 million.

FI's investigation shows that Nordnet has not met the requirements laid down in the Short Selling Regulation in terms of its service for intraday short selling. The bank has had deficiencies in its internal guidelines, procedures, risk management and risk assessment as well as in its duty of care to its customers.

Through an intraday short selling service, Nordnet has offered a small group of its customers a larger selection of shortable shares than what is offered in the bank's other short selling services. The service has been offered to the bank's most active customers or customers who have larger capital to invest. The investigation shows that the bank, when offering the service, did not control that there were enough shares available before the bank's customers were allowed to short the shares. There has therefore been a considerable risk that the customers were short selling shares without coverage, so-called naked short selling, which is banned. On one occasion it has been determined that naked short selling was widespread.

The investigation also identified that Nordnet raised the issue of deficient procedures in its intraday short selling service already in 2018, but the bank continued to provide the service without rectifying all of the deficiencies. This shows that the bank failed to prepare and apply the procedures that are required for this business.

"Nordnet has offered an inaccurate service that risks introducing shortcomings and problems to the securities market. It is particularly notable that the violations in the service were raised within the bank earlier without it taking all the necessary measures. Nordnet's actions can have a negative impact on the confidence that the market is well functioning," says Susanna Grufman, the Deputy Director General at FI.

Nordnet is therefore being issued a remark and must pay an administrative fine of SEK 100 million.

FI's Board of Directors decided on the sanction on 24 May 2022.


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