A. Intermediaries

19. As of February 2011, there were 89 banks and savings banks and 135 investment firms authorized to carry on securities business. All were located in Sweden. A majority of the Swedish banks are licensed for securities business, and the four large Swedish banks are a dominant force on the securities market. With only a few exceptions, the “nonbank” securities firms are relatively small and in most cases privately owned. Total assets for securities firms amounted to around SKr 16 billion, assets under management (AUM) SKr 28 billion and capital SKr 4 billion. The business of providing investment advice is an activity that requires a license as a securities firm. In Sweden, (in contrast to many other countries), very few firms offer investment advice as their sole activity. Instead, they generally offer a varying combination of securities services.

B. Collective Investment Schemes

20. After a dip in 2008, AUM have rebounded strongly to a record level of SKr 1.706 trillion at the end of 2010. There are 921 CIS under management of which 519 are Undertakings for Collective Investment in Transferable Securities (UCITS) and 400 are special funds. They are managed by 105 authorized firms of which, 82 are fund management companies and 23 are investment firms. There are also 3977 foreign CIS authorized in Sweden under the UCITS based legislation and two specialized funds integrated into the Swedish State Pension System. AUM in these two categories are not included in the table below. Most of the major fund management companies have significant operations in Luxemburg where most of their non-Swedish targeted funds are licensed.

Table 2.

Sweden: Collective Investment Schemes

Source: Swedish Investment Funds Association (Fondbolagen Forening).

Table 2.

Sweden: Collective Investment Schemes

SKr billions	2007	2008	2009	2010
AUM	1,486	1,043	1,459	1,706
Net value of assets	1,416	1,017	1,393	1,635
UCITS	1,223	859	1,164	1,328	81%
Non-UCITS	193	158	229	307	19%
Total	1,416	1,017	1,393	1,635	100%
Bond funds	71	93	94	106	7%
Money market funds	84	90	70	71	4%
Equity funds	787	460	723	964	59%
Mixed funds	277	219	283	203	12%
Fund of funds	73	71	107	155	10%
Other funds	124	84	116	136	8%
Total	1416	1017	1393	1,635	100%

Source: Swedish Investment Funds Association (Fondbolagen Forening).

View Table

Table 2.

Sweden: Collective Investment Schemes

SKr billions	2007	2008	2009	2010
AUM	1,486	1,043	1,459	1,706
Net value of assets	1,416	1,017	1,393	1,635
UCITS	1,223	859	1,164	1,328	81%
Non-UCITS	193	158	229	307	19%
Total	1,416	1,017	1,393	1,635	100%
Bond funds	71	93	94	106	7%
Money market funds	84	90	70	71	4%
Equity funds	787	460	723	964	59%
Mixed funds	277	219	283	203	12%
Fund of funds	73	71	107	155	10%
Other funds	124	84	116	136	8%
Total	1416	1017	1393	1,635	100%

Source: Swedish Investment Funds Association (Fondbolagen Forening).

C. Markets

21. NASDAQ OMX Stockholm is the dominant stock exchange and marketplace for Swedish shares although its market share has declined sharply in the last two years. NASDAQ OMX Group, Inc. is a United States (U.S.) public company that owns and operates the U.S. NASDAQ stock market, two U.S. exchanges, a Gulf State exchange and seven European stock and derivatives exchanges in the Nordic and Baltic regions under the OMX brand. It is currently the sixth largest trading venue in Europe.⁴ Supervision of its global business places a premium (and cost) on the FI securing close and cooperative relationships with fellow regulators wherever NASDAQ OMX operates an exchange or MTF.

22. All trading on NASDAQ OMX Stockholm is conducted through its members. The members consist of securities companies and banks which are licensed by FI to engage in securities trading. Members also include remote members, (i.e., foreign companies that engage in securities trading in Sweden from abroad). NASDAQ OMX Stockholm has 113 share trading members. In principle, non-financial companies and branches of foreign companies can be members of the stock exchange. At present, however, there are no members in this category in NASDAQ OMX Stockholm. Share trading on NASDAQ OMX Stockholm takes place electronically through the matching of orders in a central limit order book (CLOB).

23. The majority of share trading is conducted in electronic trading systems belonging to a stock exchange or a multilateral trading facility (MTF). It is also possible to trade shares outside these systems. A portion of the trading that takes place outside these systems is conducted in accordance with NASDAQ OMX Stockholm’s regulations and is reported to NASDAQ OMX Stockholm as normal stock exchange transactions. The rest is regarded as over the counter trading (OTC). Bond trading in Sweden is largely conducted by telephone while in the foreign exchange market about 85 percent of the spot trade in SKr by primary dealers is done through electronic platforms. Interbank trading in foreign exchange derivatives on the other hand is mostly not electronic.

24. Supported by its dominant role in cash equity trading in Sweden, most of the trading in equity derivatives takes place under the auspices of the NASDAQ OMX derivatives markets (DM). In addition to derivatives linked to individual shares, options and futures linked to NASDAQ OMX’s own stock indices are traded on the exchange. DM also provides clearing for the derivatives traded on its exchange and for certain OTC derivatives that are not listed for trading.

Table 3.

Sweden: Equity Trading on NASDAQ OMX, 2009

Table 3.

Sweden: Equity Trading on NASDAQ OMX, 2009

Market value 31/12 2009, SEK billion	3,413
Turnover 2009, SEK billion	3,393
Average daily turnover, SEK billion	13.5
Annual turnover, billion shares	58
Total number of deals closed during the year, million	30.3
Average amount per deal	112,127
Average number of deals per day	120,375
Rate of stock turnover, percent	119

View Table

Table 3.

Sweden: Equity Trading on NASDAQ OMX, 2009

Market value 31/12 2009, SEK billion	3,413
Turnover 2009, SEK billion	3,393
Average daily turnover, SEK billion	13.5
Annual turnover, billion shares	58
Total number of deals closed during the year, million	30.3
Average amount per deal	112,127
Average number of deals per day	120,375
Rate of stock turnover, percent	119

Table 4.

Sweden: Total Turnover of Standardized on-Exchange Contracts, January–October, 2010

Source: NASDAQ OMX Stockholm.

Table 4.

Sweden: Total Turnover of Standardized on-Exchange Contracts, January–October, 2010

Instrument	Total turnover in SKr
Index futures	5.398 trillion
Index options	29.767 billion
Equity futures (forwards)	19.017 billion
Equity options	20.820 billion
Interest rate futures (forwards)	38.276 trillion
Interest rate options	31 million
Total	43.722 trillion

Source: NASDAQ OMX Stockholm.

View Table

Table 4.

Sweden: Total Turnover of Standardized on-Exchange Contracts, January–October, 2010

Instrument	Total turnover in SKr
Index futures	5.398 trillion
Index options	29.767 billion
Equity futures (forwards)	19.017 billion
Equity options	20.820 billion
Interest rate futures (forwards)	38.276 trillion
Interest rate options	31 million
Total	43.722 trillion

Source: NASDAQ OMX Stockholm.

25. In addition to NASDAQ OMX Stockholm, Nordic Growth Market (NGM) and Burgundy have also been licensed by FI to operate as stock and derivatives exchanges in Sweden. There are also three MTFs in Sweden: First North, Nordic MTF, and Aktietorget. Swedish shares that can also be traded on overseas MTFs, such as Chi-X Europe, that have specialized in providing a marketplace for shares that are already listed on a stock exchange and thereby fulfill the listing requirements. Data from Thomson Reuters indicates that 42 percent of Swedish equity trading took place outside NASDAQ OMX in February 2011.

26. Competition in the provision of trading venues has intensified since 2007. MiFID ended the monopoly of trading of shares in domestic companies granted by many EU governments to established domestic exchanges. This has resulted in several new providers achieving significant market shares.⁵ The resulting downward pressure on exchange trading fees has undoubtedly been beneficial to investors, although exchanges have been more successful than expected in maintaining supernormal profits. The absence of a “last trade tape” and consolidated “best bid and offer” on the U.S. model have also increased search costs for institutional investors seeking to obtain “best execution.” The European Commission is seeking to resolve these problems in its current “MiFID review.”

A. Principles for the Regulator (Principles 1–5)

28. Although FI is a unitary regulator, FI has to regulate the three major sectors of financial services, banking, securities and insurance under several separate statutes. While each act may be clear when considered in isolation, there can be problems at the interfaces which can create risks to investors though this is a matter of the effectiveness of enforcement of the law rather than gaps between laws, FI is highly accountable. Restrictions on operational independence arise from the imposition of mandatory special requirements during the course of a financial year and its reliance for 85 percent of its funding on Parliament. Although staff resources have increased in recent years they remain insufficient for current and predictable future work; turnover, particularly of experienced staff, is high. There are rules in place for dealing with the regulator that are intended to ensure procedural fairness, as required by the Principle; the structure of FI is well described and the processes are reasonably transparent. In practice the process of representation prior to the imposition of a major sanction such as license revocation may need enhancement. The Board and staff of FI are subject to the highest professional standards and these are appropriately monitored.

B. Principles for Self Regulation (Principles 6–7)

29. Self regulation has a long history in Sweden and still has a far greater role here than in many other European countries. Although the powers of the FI over exchanges have been strengthened since the 2001 FSAP there are still limitations in FI’s ability to secure changes in certain rules and processes it believes to be necessary short of the threat of the imposition of significant sanctions. Despite being regarded as self regulatory bodies, (in that they are not government authorities but exist in the private sector) the listing rules of securities exchanges and the power to make them are set out in the law. As a result, in this part of their business model the accountability of securities exchanges to FI, the statutory regulator, is unclear.

C. Principles for Enforcement (Principles 8–10):

30. FI has a comprehensive range of inspection, investigation, surveillance and enforcement powers and where it has delegated powers ((e.g., to the Swedish Securities Council regarding takeovers) that has been done with the appropriate degree of oversight and review. Scarce resources limit the capability to carry out effective enforcement and compliance activities thereby limiting the ability of FI to ensure compliance or detect breaches. The interface between supervision and enforcement does not recognize the different skill and mind sets required. The maximum amount licensees and others can be fined is too low and there have been cases where the FI’s use of its statutory discretion not to fine a fund manager which has remedied a breach indicates a significant weakness in FI’s use of administrative sanctions.

D. Principles for Cooperation (Principles 11–13)

31. FI and other government authorities have fundamental obligation to share information including with foreign regulators. There are appropriate confidentiality provisions in the law and the gateways through these appear effective. FI has more than 40 active MoUs and Letters of Intent with foreign authorities. As a result of a very recent change in the law (March 1, 2011) FI can now share information with foreign counterparts even if the alleged conduct is not such that it would constitute a breach of Swedish law if conducted within Sweden. Previously this issue was an impediment to sharing information with foreign regulators. As a result of the change FI reapplied to become a full signatory to the IOSCO Multilateral Memorandum of Understanding (MMoU). This was granted in April 2011. FI has extensive powers to assist foreign regulators with information held by FI. It also has extensive powers to access information held by other entities.

E. Principles for Issuers (Principles 14–16)

32. Because the listing rules of NASDAQ OMX and the other securities exchanges derive directly from statute, FI has little influence over the conduct of listed companies except via seeking to ensure that the exchanges interpret and enforce their listing rules appropriately. The provisions whereby a company can keep confidential information it would otherwise be required to make public lack specificity. NASDAQ OMX (currently the dominant exchange for listed companies) claims that its criteria for granting exceptions are very narrow. The maximum of 120 days for filing annual reports, while it may the EEA standard is slow by comparison with some other advanced markets where 90 or 75 days is the norm. There is high level of protection for securities holders in Swedish company law and via implementation of EU directives on takeovers and shareholder rights. Sweden applies the “comply or explain” approach with regard to corporate governance of public companies. The governance code is updated by a private sector body which has self regulatory elements. Although the existence of classes of shares with multiple voting rights renders some major companies largely immune from hostile takeovers bids, these arrangements are transparent to incoming minority shareholders. Although the conduct of takeovers is governed by stock exchange listing rules, another self regulatory body, the Swedish Securities Council, operating under delegated powers from FI (and subject to its oversight), plays a role in enforcing the rules and granting exemptions. Company boards have to represent the interests of all shareholders equally and there are limits to their use of defense mechanisms to thwart a hostile bid. Accounting and auditing standards are high. The supervision of auditors and auditing standards is the responsibility of a government authority, the Supervisory Board of Public Accountants. Sweden has adopted the International Federation of Accountants (IFAC) International Standards on Auditing (ISA). Independence of auditors is required under the Auditors Act and Swedish Auditing Standards (RS) which are based on the ISA standard but with some enhancements. Group accounts (and those of listed companies) must be prepared according to International Financial Reporting Standards (IFRS) as adopted by the EU. Other companies may use a mix of IFRS and Swedish GAAP. The reason for this lies in the tax system. The Swedish Accounting Standards Board is responsible for interpreting the latter. Although standards as regards companies listed on an RM are set by the Swedish Financial Reporting Board, enforcements of elements of the regime is the responsibility of the relevant stock exchange. This looks unsound in a market where for-profit exchanges have begun to compete for listings. The position is currently under review in the MoF.

F. Principles for Collective Investment Schemes (Principles 17–20)

33. FI has inadequate resources to effectively supervise fund management companies and insurance intermediaries who market CIS. The department finds it difficult to do more than 10 AMC specific on-site inspections a year. The last comprehensive survey (three years ago) discovered a level of non-compliance which suggests many breaches go undiscovered unless investors complain. Insurance intermediaries are in practice largely unsupervised for this business. They are not required to provide quarterly reports, require no capital but carry PII; the department relies on customer complaints to indicate problems. Too much reliance is placed on a legal requirement for licensees self-reporting breaches or the external auditor doing so. There is evidence that this system has not been working as was intended and the FI has begun to explore mechanisms by which it might be improved Sweden has seen the emergence of a category of fund salespersons that has unexpectedly been able to exploit an element of the Swedish interpretation of the UCITS directive whereby Sweden has implemented a set of rules that allows for marketing in the sense of advertising of a CIS with no requirement to obtain a license in advance. The unregulated nature of this business means that there are no safeguards as to the quality or suitability of funds sold as would apply to properly notified or licensed fund sales. To clarify that this is not the intention of the rules Sweden plans shortly to strengthen the wording of the IFA, such that any kind of marketing of a CIS in Sweden will require a notification or license. Due to resource constraints FI is unable to be fully effective in supervising compliance with its asset segregation rules. Recent cases highlighted breaches extending, in one case, over several years. FI’s policy as regards use of its fining powers do not appear sufficient to act as a deterrent to major fund managers and custodians. Disclosure requirements are as in the UCITS III and appear sufficient. There will be new rules, and additional obligations on the boards of UCITS management companies with the implementation of UCITS IV in July 2011. On unlisted securities FI has issued guidance imposing a special duty of care on fund managers. Valuations should be carried out by independent and competent persons according to consistently applied and pre-defined principles. Under this guidance it would not be appropriate that the valuation be performed by the person or persons responsible for the management of the fund. There are appropriate regulations governing the treatment of pricing errors and suspension of redemptions.

G. Principles for Intermediaries (Principles 21–24)

34. The number of staff carrying on prudential and in particular conduct of business supervision is insufficient. Applicants for a license are only subject to an on-site inspection if their business is sufficiently large and complex that physical Chinese walls are an issue. The six major firms are seen by the prudential supervisors at least annually and often quarterly; the remainder are seen once in 2.5 years. Conduct of business supervisors do no on-site inspections except for cause or as part of “themed” projects. Within the limits set by the number of staff, inspections and examinations appear thorough. Pre-visit planning is detailed and objective based. Feedback to firms itemizes problem areas comprehensively and action is required and followed up. The department has introduced a risk based supervision approach to make the best use of limited resources. There is a problem in the interface between the SMA and the Insurance Intermediation Act which create risk to retail investors. Unless licensed under the more rigorous requirements of the SMA an insurance intermediary is not permitted to give investment advice on shares, bonds structured products or other complex financial instruments but some are doing so. FI has recently initiated a full review of its relevant regulations. This review covers the full regulation of insurance intermediaries, not only the ancillary service of selling investment funds. The project is looking for ways to tighten the application procedure and to come up with suggestion for necessary changes in the overall regulation.

35. There are initial and ongoing minimum capital requirements with which market intermediaries must comply. These requirements are harmonized at the EU level under the Capital Requirements Directive, (CRD). These have been fully transposed into Swedish law via the Capital Adequacy and Large Exposures Act (2006). The requirements set out in the IOSCO Principle appear to be present. An intermediary is required to have an adequate management and organizational structure and adequate internal controls. An intermediary is required to have senior management that is of sufficiently good repute and sufficiently experienced. The senior management is primary responsible for ensuring that an intermediary complies with its legal obligations. An intermediary is required to maintain, monitor and regularly evaluate its procedures and systems; to have an internal audit function and to appoint an independent external auditor. An intermediary is required to self-report problems to FI and the external auditor has an obligation to report any problems discovered on the audit of the intermediary. The effectiveness of this last requirement is in doubt, which, as a result of one large case, has stretched the supervision resources even farther than normal. The appropriate agreements are in place to deal with a failure of an intermediary. FI, RB, and the MoF have signed a MoU regarding crisis management. FI is a signatory to the MoU on cooperation between the financial supervisory authorities, central banks, and finance ministries of the EU on cross-border financial stability. With regards to Swedish financial institutions with significant activities in other countries, such as Nordea Bank and NASDAQ OMX, there are MoUs on supervision with other relevant jurisdictions within Sweden and in the Nordic area. Although NASDAQ OMX is now owned by the second largest stock market operating group in the U.S., FI does not have a formal MoU with the U.S. Securities and Exchange Commission (SEC). Regular scenario/stress test situations are carried out together with RB. Such work has also been carried out at the Nordic level.

H. Principles for Secondary Markets (Principles 25–29)

36. In comparison with securities exchanges in most of Europe and indeed globally, securities exchanges in Sweden have a wide self regulatory remit. In recent years FI’s powers over exchanges have been significantly strengthened. The authorization provisions currently applied to trading systems operated by some of the large banks do not fully meet the IOSCO Principle regarding transparency. Although FI reviews the trading rules of a securities exchange for compliance with the SMA and its regulations, the FI does not review and analyze the performance of trade matching or execution algorithm of automated trading systems. As for the transparency of markets generally there are challenges across Europe as markets fragment and a variety of trading platforms are developed. Sweden does not appear to derogate from the current MiFID pre and post trade transparency regime. The rating recognizes the concerns identified in Sweden and elsewhere as part of the current MiFID review on specific elements in the current regime.

37. Overall it appears that although the NECB has a good record in successfully prosecuting those cases it brings to court, the current regime has only limited deterrent effect in applying dissuasive sanctions for criminal offences such as insider dealing. In this context Sweden has implemented the Market Abuse Directive. Elsewhere, in securing market integrity and minimizing systemic risk Sweden has implemented the relevant EU directives such as the Settlement Finality Directive. Large Exposures are dealt with in the Capital Adequacy and Large Exposures Act to which all banks and market intermediaries are subject. FI does not itself monitor open positions but has the right to require full information about positions from the central securities depository (CSD), central counterparty (CCP), and licensed firms. The market authorities have powers to take action under their rules and regulations if necessary.

38. Although the CSD was not assessed FI has observed that since 2001 the clearing and settlement system for cash bonds and equities on NASDAQ OMX has been radically improved to take account of the IMF assessment at the time by introducing a gross rather than net settlement system. It is now owned by Euroclear, one of the two Europe based International Central Securities Depositories (ICSD). There is a CCP for top tier stocks, the European Multilateral Clearing Facility (EMCF), based in the Netherlands. FI has a MoU on this arrangement with the Dutch regulator.

Table 5.

Sweden: Summary Implementation of the IOSCO Objectives and Principles—Detailed Assessment

Table 5.

Sweden: Summary Implementation of the IOSCO Objectives and Principles—Detailed Assessment

Principle	Grading	Findings
Principle 1. The responsibilities of the regulator should be clearly and objectively stated.	FI	Although FI is a unitary regulator FI has to regulate the three major sectors of financial services, banking, securities and insurance under several separate statutes. While each Act may be clear when considered in isolation, there can be problems at the interfaces which can create risks to retail investors though this is a matter of the effectiveness of enforcement of the law rather than gaps between laws.
Principle 2. The regulator should be operationally independent and accountable in the exercise of its functions and powers.	BI	FI is highly accountable. Restrictions on operational independence arise from the imposition of mandatory special requirements during the course of a financial year and its reliance for 85 percent of its funding on Parliament.
Principle 3. The regulator should have adequate powers, proper resources and the capacity to perform its functions and exercise its powers.	BI	Although staff resources have increased in recent years they remain insufficient for current and predictable future work; turnover, particularly of experienced staff, is high.
Principle 4. The regulator should adopt clear and consistent regulatory processes.	BI	There are rules in place for dealing with the regulator that are intended to ensure procedural fairness, as required by the Principle; the structure of FI is well described and the processes are reasonably transparent. In practice, the process of permitting a party to be heard prior to the imposition of a major sanction such as license revocation may need enhancement.
Principle 5. The staff of the regulator should observe the highest professional standards.	FI	The Board and staff of FI are subject to the highest professional standards and these are appropriately monitored.
Principle 6. The regulatory regime should make appropriate use of self-regulatory organizations (SROs) that exercise some direct oversight responsibility for their respective areas of competence and to the extent appropriate to the size and complexity of the markets.	FI	Self regulation has a long history in Sweden and still has a far greater role here than in many other European countries.
Principle 7. SROs should be subject to the oversight of the regulator and should observe standards of fairness and confidentiality when exercising powers and delegated responsibilities.	BI	Although the powers of the FI over exchanges have been strengthened since the 2001 FSAP there are still limitations.
		Despite being regarded as self regulatory bodies, (in that they are not government authorities but exist in the private sector), the listing rules of securities exchanges and the power to make them are set out in the law. As a result, in this part of their business model their accountability to FI, the statutory regulator, is unclear.
Principle 8. The regulator should have comprehensive inspection, investigation and surveillance powers.	FI	FI has a comprehensive range of powers and where it has delegated these power, e.g., to the Swedish Securities Council as regards takeovers, that has been done with the appropriate degree of oversight and review.
Principle 9. The regulator should have comprehensive enforcement powers.	FI	FI has comprehensive enforcement powers.
Principle 10. The regulatory system should ensure an effective and credible use of inspection, investigation, surveillance and enforcement powers and implementation of an effective compliance program.	PI	Scarce resources limit the possibilities to detect breaches. The interface between supervision and enforcement does not recognize the different skill and mind sets required. The maximum amount licensees and others can be fined is too low and there have been cases where the FI’s use of its statutory discretion not to fine a fund manager which has remedied a breach indicates a significant weakness in FI’s use of administrative sanctions.
Principle 11. The regulator should have the authority to share both public and nonpublic information with domestic and foreign counterparts.	FI	FI and other government authorities have fundamental obligation to share information including with foreign regulators. There are appropriate confidentiality provisions in the law and the gateways through these appear effective.
Principle 12. Regulators should establish information sharing mechanisms that set out when and how they will share both public and non-public information with their domestic and foreign counterparts.	FI	FI has more than 40 active MoUs and Letters of Intent with foreign authorities. As a result of a very recent change in the law (March 1, 2011) FI can now share information with foreign counterparts even if the alleged conduct is not such that it would constitute a breach of Swedish law if conducted within Sweden. As a result of the change FI became a full signatory to the IOSCO MMoU in April 2011. Previously this issue was an impediment to sharing information with foreign regulators.
Principle 13. The regulatory system should allow for assistance to be provided to foreign regulators who need to make inquiries in the discharge of their functions and exercise of their powers.	FI	FI has extensive powers to assist foreign regulators with information held by FI. It also has extensive powers to access information held by other entities.
Principle 14. There should be full, timely and accurate disclosure of financial results and other information that is material to investors’ decisions.	BI	Because the listing rules of NASDAQ OMX and the other securities exchanges derive directly from the law, FI has little influence over the conduct of listed companies except via seeking to ensure that the exchanges interpret and enforce their listing rules appropriately. The provisions whereby a company can keep confidential information it would otherwise be required to make public lack specificity. NASDAQ OMX (currently the dominant exchange for listed companies) claims that its criteria for granting exceptions are very narrow. The maximum of 120 days for filing annual reports, while it may the European standard is slow by comparison with some other advanced markets where 90 or 75 days is the norm.
Principle 15. Holders of securities in a company should be treated in a fair and equitable manner.	FI	There is a high level of protection for securities holders in Swedish company law and via implementation of EU directives on takeovers and shareholder rights. Sweden applies the “comply or explain” approach with regard to corporate governance of public companies. The Code is updated by a private sector body which has self regulatory elements. There is a high level of protection for securities Although the existence of classes of shares with multiple voting rights renders some major companies largely immune from hostile takeovers bids, these arrangements are transparent to incoming minority shareholders. Although the conduct of takeovers is governed by stock exchange listing rules another self regulatory body, the Swedish Securities Council, operating under delegated powers from FI (and subject to its oversight), plays a role in enforcing the rules and granting exemptions. Company boards have to represent the interests of all shareholders equally and there are limits to their use of defense mechanisms to thwart a hostile bid.
Principle 16. Accounting and auditing standards should be of a high and internationally acceptable quality.	FI	Accounting and auditing standards are high. The supervision of auditors and auditing standards is the responsibility of a government authority, the Supervisory Board of Public Accountants. Sweden has adopted the IFAC, ISA. Independence of auditors is required under the Auditors Act and RS (Swedish Auditing standard) which is based on the ISA standard but with some enhancements. Group accounts (and those of listed companies) must be prepared according to IFRS as adopted by the EU. Other companies may use a mix of IFRS and Swedish GAAP. This is tax driven. The Swedish Accounting Standards Board is responsible for interpreting the latter. Enforcements of elements of the accounting regime for listed companies is the responsibility of the relevant stock exchanges. This looks unsound in a market where competing for profit exchanges have begun to compete for listings The position is currently under review in the MoF.
Principle 17. The regulatory system should set standards for the eligibility and the regulation of those who wish to market or operate a CIS.	PI	Fund management companies and insurance intermediaries who market CIS. The department finds it difficult to carry out more than 10 AMC specific inspections in a year. The last comprehensive survey (three years ago) discovered a level of non-compliance which suggests many breaches currently go undiscovered unless investors complain. FI has inadequate resources to effectively supervise Insurance intermediaries are in practice largely unsupervised for the sale of CIS. They are not required to provide quarterly report, require no capital but carry PII; FI relies on customer complaints to indicate problems. Too much reliance is place on licensees self-reporting breaches or the external auditor doing so as required under the law. There is evidence that this system has not been working as was intended and the FI has begun to explore mechanisms by which it might be improved Sweden has seen the emergence of a category of fund salespersons that has unexpectedly been able to exploit an element of the Swedish interpretation of the UCITS directive whereby Sweden has implemented a set of rules that allows for marketing in the sense of advertising of a CIS with no requirement to obtain a license in advance. The unregulated nature of this business means that there are no safeguards as to the quality or suitability of funds sold as would apply to properly notified or licensed fund sales. To clarify that this is not the intention of the rules Sweden plans shortly to strengthen the wording of the IFA, such that any kind of marketing of a CIS in Sweden will require a notification or license.
Principle 18. The regulatory system should provide for rules governing the legal form and structure of CIS and the segregation and protection of client assets.	BI	Due to resource constraints FI is unable to be fully effective in supervising compliance with its asset segregation rules. Recent cases highlighted breaches extending, in one case, over several years. FT’s fining policy in this area does not appear sufficiently tough to act as a deterrent to major fund managers and custodians.
Principle 19. Regulation should require disclosure, as set forth under the principles for issuers, which is necessary to evaluate the suitability of a CIS for a particular investor and the value of the investor’s interest in the scheme.	FI	Disclosure requirements are as in the UCITS III Directive and appear sufficient. There will be new rules, and additional obligations on the boards of UCITS management companies with the implementation of the UCITS IV directive in July 2011.
Principle 20. Regulation should ensure that there is a proper and disclosed basis for assets valuation and the pricing and the redemption of units in a CIS.	FI	Current requirements are as set out in UCITS III and appear satisfactory. There will be new rules on principles for valuation of the fund with the implementation of UCITS IV. On unlisted securities FI has issued guidance imposing a special duty of care on fund managers. Valuations should be carried out by independent and competent persons according to consistently applied and predefined principles. Under this guidance it would not be appropriate for the valuation to be performed by the person or persons responsible for the management of the fund. There are appropriate regulations governing the treatment of pricing errors and suspension of redemptions.
Principle 21. Regulation should provide for minimum entry standards for market intermediaries.	PI	The number of staff carrying on prudential and in particular conduct of business supervision is insufficient. Applicants for a license are only subject to an on-site inspection if their business is sufficiently large and complex that physical Chinese walls are an issue. The 6 or so major firms are seen by the prudential supervisors at least annually and often quarterly; the remainders are seen once in 2.5 years. Conduct of business rules supervisors do no on-site inspections except for cause or as part of “themed” projects. Within the limits set by the number of staff, inspections and examinations appear thorough. Pre-visit planning is detailed and objective based. Feedback to firms itemizes problem areas comprehensively and action is required and is followed up. The department has introduced a risk based supervision approach to make the best use of limited resources. Unless licensed under the more rigorous requirements of the SMA an insurance intermediary is not permitted to give investment advice on shares, bonds structured products or other complex financial instruments but some are doing so. FI has recently initiated a full review of its relevant regulations. This review covers the full regulation of insurance intermediaries, not only the ancillary service of the sale of investment funds. The project is looking for ways to tighten the application procedure and to come with suggestion for necessary changes in the overall regulation.
Principle 22. There should be initial and ongoing capital and other prudential requirements for market intermediaries that reflect the risks that the intermediaries undertake.	FI	There are initial and ongoing minimum capital requirements with which market intermediaries must comply. These requirements are harmonized on EU level under MIFID and the Capital Requirement Directive, (CRD). These have been fully transposed into Swedish law via the Capital Adequacy and Large Exposures Act (2006).
Principle 23. Market intermediaries should be required to comply with standards for internal organization and operational conduct that aim to protect the interests of clients, ensure proper management of risk, and under which management of the intermediary accepts primary responsibility for these matters.	FI	The requirements set out in the IOSCO Principle appear to be present. An intermediary is required to have an adequate management and organizational structure and adequate internal controls. An intermediary is required to have senior management that is of sufficiently good repute and sufficiently experienced. The senior management is primary responsible for ensuring that an intermediary complies with its legal obligations. An intermediary is required to maintain, monitor and regularly evaluate its procedures and systems; to have an internal audit function and to appoint an independent external auditor. An intermediary should self-report problems to FI and the external auditor has the same obligation. The effectiveness of this last requirement is in doubt, which, as a result of one large case, has stretched the supervision resources even farther than normal.
Principle 24. There should be a procedure for dealing with the failure of a market intermediary in order to minimize damage and loss to investors and to contain systemic risk.	FI	The appropriate agreements are in place. FI, RB and the MoF have signed a MoU regarding crisis management. FI is a signatory to the MoU on cooperation between the financial supervisory authorities, central banks and finance ministries of the European Union on cross-border financial stability. With regards to Swedish financial institutions with significant activities in other countries, such as Nordea Bank and NASDAQ OMX, there are MoUs on supervision with other relevant jurisdictions within Sweden and in the Nordic area. Although NASDAQ OMX is now owned by the second largest stock market operating group in the USA, FI does not have a formal MoU with the US SEC. Regular scenario/stress test situations are carried out together with RB. Such situations have also been carried out at the Nordic level. There is an Investors Compensation Schema as required under EU law. During the last three years, FI has successfully handled several major instances of failure of an intermediary in cooperation with other authorities in Sweden and overseas. Examples are Carnegie Investment Bank in 2008 and the situation in the Baltics in 2008.
Principle 25. The establishment of trading systems including securities exchanges should be subject to regulatory authorization and oversight.	BI	The authorization provisions currently applied to trading systems operated by some of the large banks do not fully meet the requirements of Principle 25 concerning adequate transparency.
Principle 26. There should be ongoing regulatory supervision of exchanges and trading systems, which should aim to ensure that the integrity of trading is maintained through fair and equitable rules that strike an appropriate balance between the demands of different market participants.	FI	FI’s powers over stock exchanges as trading systems have been strengthened in recent years although weakness exist in one aspect of their business model - listings. See Principle 7.
Principle 27. Regulation should promote transparency of trading.	BI	There are challenges across Europe in achieving appropriate levels of market transparency. Sweden does not appear to derogate from the current MiFID pre and post trade transparency regime. The rating recognizes the concerns identified in Sweden and elsewhere as part of the current MiFID review on specific elements in the current regime.
Principle 28. Regulation should be designed to detect and deter manipulation and other unfair trading practices.	PI	Sanctions for violation of the criminal law are not sufficient to be fully effective, proportionate and dissuasive as required by the Principle. The NECB has a good record in obtaining prosecutions in those case it does bring to court. It may also be the case that the collateral costs of a acquiring a criminal record for insider dealing such as diminished prospects for future employment by an FI licensed firm), add to the dissuasive value of a conviction even if the direct costs are very low.
Principle 29. Regulation should aim to ensure the proper management of large exposures, default risk and market disruption.	FI	Sweden has implemented the relevant EU Directives such as the Settlement Finality Directive. Large Exposures are dealt with in the Capital Adequacy and large Exposures Act to which all banks and market intermediaries are subject. FI does not itself monitor open positions but has the right to require full information about positions from the CSD, CCP and licensed firms. The market authorities have powers to take action under their rules and regulations if necessary.
Principle 30. Systems for clearing and settlement of securities transactions should be subject to regulatory oversight, and designed to ensure that they are fair, effective and efficient and that they reduce systemic risk.	Not assessed	FI lias observed that since 2001 the clearing and settlement system for cash bonds and equities on NASDAQ OMX has been radically improved to take account of the IMF assessment at the time by introducing a gross rather than net settlement system. It is now owned by Euroclear, one of the two Europe based global ICSDs. There is a CCP for top tier stocks (ECMF) based in the Netherlands. FI has a MoU on this arrangement with the Dutch regulator.
Aggregate: Fully implemented (FI) – 17, broadly implemented (BI) – 8, partly implemented (PI) – 4, not implemented (NI) – 0, not applicable (N/A) – 0.

View Table

Table 5.

Sweden: Summary Implementation of the IOSCO Objectives and Principles—Detailed Assessment

Principle	Grading	Findings
Principle 1. The responsibilities of the regulator should be clearly and objectively stated.	FI	Although FI is a unitary regulator FI has to regulate the three major sectors of financial services, banking, securities and insurance under several separate statutes. While each Act may be clear when considered in isolation, there can be problems at the interfaces which can create risks to retail investors though this is a matter of the effectiveness of enforcement of the law rather than gaps between laws.
Principle 2. The regulator should be operationally independent and accountable in the exercise of its functions and powers.	BI	FI is highly accountable. Restrictions on operational independence arise from the imposition of mandatory special requirements during the course of a financial year and its reliance for 85 percent of its funding on Parliament.
Principle 3. The regulator should have adequate powers, proper resources and the capacity to perform its functions and exercise its powers.	BI	Although staff resources have increased in recent years they remain insufficient for current and predictable future work; turnover, particularly of experienced staff, is high.
Principle 4. The regulator should adopt clear and consistent regulatory processes.	BI	There are rules in place for dealing with the regulator that are intended to ensure procedural fairness, as required by the Principle; the structure of FI is well described and the processes are reasonably transparent. In practice, the process of permitting a party to be heard prior to the imposition of a major sanction such as license revocation may need enhancement.
Principle 5. The staff of the regulator should observe the highest professional standards.	FI	The Board and staff of FI are subject to the highest professional standards and these are appropriately monitored.
Principle 6. The regulatory regime should make appropriate use of self-regulatory organizations (SROs) that exercise some direct oversight responsibility for their respective areas of competence and to the extent appropriate to the size and complexity of the markets.	FI	Self regulation has a long history in Sweden and still has a far greater role here than in many other European countries.
Principle 7. SROs should be subject to the oversight of the regulator and should observe standards of fairness and confidentiality when exercising powers and delegated responsibilities.	BI	Although the powers of the FI over exchanges have been strengthened since the 2001 FSAP there are still limitations.
		Despite being regarded as self regulatory bodies, (in that they are not government authorities but exist in the private sector), the listing rules of securities exchanges and the power to make them are set out in the law. As a result, in this part of their business model their accountability to FI, the statutory regulator, is unclear.
Principle 8. The regulator should have comprehensive inspection, investigation and surveillance powers.	FI	FI has a comprehensive range of powers and where it has delegated these power, e.g., to the Swedish Securities Council as regards takeovers, that has been done with the appropriate degree of oversight and review.
Principle 9. The regulator should have comprehensive enforcement powers.	FI	FI has comprehensive enforcement powers.
Principle 10. The regulatory system should ensure an effective and credible use of inspection, investigation, surveillance and enforcement powers and implementation of an effective compliance program.	PI	Scarce resources limit the possibilities to detect breaches. The interface between supervision and enforcement does not recognize the different skill and mind sets required. The maximum amount licensees and others can be fined is too low and there have been cases where the FI’s use of its statutory discretion not to fine a fund manager which has remedied a breach indicates a significant weakness in FI’s use of administrative sanctions.
Principle 11. The regulator should have the authority to share both public and nonpublic information with domestic and foreign counterparts.	FI	FI and other government authorities have fundamental obligation to share information including with foreign regulators. There are appropriate confidentiality provisions in the law and the gateways through these appear effective.
Principle 12. Regulators should establish information sharing mechanisms that set out when and how they will share both public and non-public information with their domestic and foreign counterparts.	FI	FI has more than 40 active MoUs and Letters of Intent with foreign authorities. As a result of a very recent change in the law (March 1, 2011) FI can now share information with foreign counterparts even if the alleged conduct is not such that it would constitute a breach of Swedish law if conducted within Sweden. As a result of the change FI became a full signatory to the IOSCO MMoU in April 2011. Previously this issue was an impediment to sharing information with foreign regulators.
Principle 13. The regulatory system should allow for assistance to be provided to foreign regulators who need to make inquiries in the discharge of their functions and exercise of their powers.	FI	FI has extensive powers to assist foreign regulators with information held by FI. It also has extensive powers to access information held by other entities.
Principle 14. There should be full, timely and accurate disclosure of financial results and other information that is material to investors’ decisions.	BI	Because the listing rules of NASDAQ OMX and the other securities exchanges derive directly from the law, FI has little influence over the conduct of listed companies except via seeking to ensure that the exchanges interpret and enforce their listing rules appropriately. The provisions whereby a company can keep confidential information it would otherwise be required to make public lack specificity. NASDAQ OMX (currently the dominant exchange for listed companies) claims that its criteria for granting exceptions are very narrow. The maximum of 120 days for filing annual reports, while it may the European standard is slow by comparison with some other advanced markets where 90 or 75 days is the norm.
Principle 15. Holders of securities in a company should be treated in a fair and equitable manner.	FI	There is a high level of protection for securities holders in Swedish company law and via implementation of EU directives on takeovers and shareholder rights. Sweden applies the “comply or explain” approach with regard to corporate governance of public companies. The Code is updated by a private sector body which has self regulatory elements. There is a high level of protection for securities Although the existence of classes of shares with multiple voting rights renders some major companies largely immune from hostile takeovers bids, these arrangements are transparent to incoming minority shareholders. Although the conduct of takeovers is governed by stock exchange listing rules another self regulatory body, the Swedish Securities Council, operating under delegated powers from FI (and subject to its oversight), plays a role in enforcing the rules and granting exemptions. Company boards have to represent the interests of all shareholders equally and there are limits to their use of defense mechanisms to thwart a hostile bid.
Principle 16. Accounting and auditing standards should be of a high and internationally acceptable quality.	FI	Accounting and auditing standards are high. The supervision of auditors and auditing standards is the responsibility of a government authority, the Supervisory Board of Public Accountants. Sweden has adopted the IFAC, ISA. Independence of auditors is required under the Auditors Act and RS (Swedish Auditing standard) which is based on the ISA standard but with some enhancements. Group accounts (and those of listed companies) must be prepared according to IFRS as adopted by the EU. Other companies may use a mix of IFRS and Swedish GAAP. This is tax driven. The Swedish Accounting Standards Board is responsible for interpreting the latter. Enforcements of elements of the accounting regime for listed companies is the responsibility of the relevant stock exchanges. This looks unsound in a market where competing for profit exchanges have begun to compete for listings The position is currently under review in the MoF.
Principle 17. The regulatory system should set standards for the eligibility and the regulation of those who wish to market or operate a CIS.	PI	Fund management companies and insurance intermediaries who market CIS. The department finds it difficult to carry out more than 10 AMC specific inspections in a year. The last comprehensive survey (three years ago) discovered a level of non-compliance which suggests many breaches currently go undiscovered unless investors complain. FI has inadequate resources to effectively supervise Insurance intermediaries are in practice largely unsupervised for the sale of CIS. They are not required to provide quarterly report, require no capital but carry PII; FI relies on customer complaints to indicate problems. Too much reliance is place on licensees self-reporting breaches or the external auditor doing so as required under the law. There is evidence that this system has not been working as was intended and the FI has begun to explore mechanisms by which it might be improved Sweden has seen the emergence of a category of fund salespersons that has unexpectedly been able to exploit an element of the Swedish interpretation of the UCITS directive whereby Sweden has implemented a set of rules that allows for marketing in the sense of advertising of a CIS with no requirement to obtain a license in advance. The unregulated nature of this business means that there are no safeguards as to the quality or suitability of funds sold as would apply to properly notified or licensed fund sales. To clarify that this is not the intention of the rules Sweden plans shortly to strengthen the wording of the IFA, such that any kind of marketing of a CIS in Sweden will require a notification or license.
Principle 18. The regulatory system should provide for rules governing the legal form and structure of CIS and the segregation and protection of client assets.	BI	Due to resource constraints FI is unable to be fully effective in supervising compliance with its asset segregation rules. Recent cases highlighted breaches extending, in one case, over several years. FT’s fining policy in this area does not appear sufficiently tough to act as a deterrent to major fund managers and custodians.
Principle 19. Regulation should require disclosure, as set forth under the principles for issuers, which is necessary to evaluate the suitability of a CIS for a particular investor and the value of the investor’s interest in the scheme.	FI	Disclosure requirements are as in the UCITS III Directive and appear sufficient. There will be new rules, and additional obligations on the boards of UCITS management companies with the implementation of the UCITS IV directive in July 2011.
Principle 20. Regulation should ensure that there is a proper and disclosed basis for assets valuation and the pricing and the redemption of units in a CIS.	FI	Current requirements are as set out in UCITS III and appear satisfactory. There will be new rules on principles for valuation of the fund with the implementation of UCITS IV. On unlisted securities FI has issued guidance imposing a special duty of care on fund managers. Valuations should be carried out by independent and competent persons according to consistently applied and predefined principles. Under this guidance it would not be appropriate for the valuation to be performed by the person or persons responsible for the management of the fund. There are appropriate regulations governing the treatment of pricing errors and suspension of redemptions.
Principle 21. Regulation should provide for minimum entry standards for market intermediaries.	PI	The number of staff carrying on prudential and in particular conduct of business supervision is insufficient. Applicants for a license are only subject to an on-site inspection if their business is sufficiently large and complex that physical Chinese walls are an issue. The 6 or so major firms are seen by the prudential supervisors at least annually and often quarterly; the remainders are seen once in 2.5 years. Conduct of business rules supervisors do no on-site inspections except for cause or as part of “themed” projects. Within the limits set by the number of staff, inspections and examinations appear thorough. Pre-visit planning is detailed and objective based. Feedback to firms itemizes problem areas comprehensively and action is required and is followed up. The department has introduced a risk based supervision approach to make the best use of limited resources. Unless licensed under the more rigorous requirements of the SMA an insurance intermediary is not permitted to give investment advice on shares, bonds structured products or other complex financial instruments but some are doing so. FI has recently initiated a full review of its relevant regulations. This review covers the full regulation of insurance intermediaries, not only the ancillary service of the sale of investment funds. The project is looking for ways to tighten the application procedure and to come with suggestion for necessary changes in the overall regulation.
Principle 22. There should be initial and ongoing capital and other prudential requirements for market intermediaries that reflect the risks that the intermediaries undertake.	FI	There are initial and ongoing minimum capital requirements with which market intermediaries must comply. These requirements are harmonized on EU level under MIFID and the Capital Requirement Directive, (CRD). These have been fully transposed into Swedish law via the Capital Adequacy and Large Exposures Act (2006).
Principle 23. Market intermediaries should be required to comply with standards for internal organization and operational conduct that aim to protect the interests of clients, ensure proper management of risk, and under which management of the intermediary accepts primary responsibility for these matters.	FI	The requirements set out in the IOSCO Principle appear to be present. An intermediary is required to have an adequate management and organizational structure and adequate internal controls. An intermediary is required to have senior management that is of sufficiently good repute and sufficiently experienced. The senior management is primary responsible for ensuring that an intermediary complies with its legal obligations. An intermediary is required to maintain, monitor and regularly evaluate its procedures and systems; to have an internal audit function and to appoint an independent external auditor. An intermediary should self-report problems to FI and the external auditor has the same obligation. The effectiveness of this last requirement is in doubt, which, as a result of one large case, has stretched the supervision resources even farther than normal.
Principle 24. There should be a procedure for dealing with the failure of a market intermediary in order to minimize damage and loss to investors and to contain systemic risk.	FI	The appropriate agreements are in place. FI, RB and the MoF have signed a MoU regarding crisis management. FI is a signatory to the MoU on cooperation between the financial supervisory authorities, central banks and finance ministries of the European Union on cross-border financial stability. With regards to Swedish financial institutions with significant activities in other countries, such as Nordea Bank and NASDAQ OMX, there are MoUs on supervision with other relevant jurisdictions within Sweden and in the Nordic area. Although NASDAQ OMX is now owned by the second largest stock market operating group in the USA, FI does not have a formal MoU with the US SEC. Regular scenario/stress test situations are carried out together with RB. Such situations have also been carried out at the Nordic level. There is an Investors Compensation Schema as required under EU law. During the last three years, FI has successfully handled several major instances of failure of an intermediary in cooperation with other authorities in Sweden and overseas. Examples are Carnegie Investment Bank in 2008 and the situation in the Baltics in 2008.
Principle 25. The establishment of trading systems including securities exchanges should be subject to regulatory authorization and oversight.	BI	The authorization provisions currently applied to trading systems operated by some of the large banks do not fully meet the requirements of Principle 25 concerning adequate transparency.
Principle 26. There should be ongoing regulatory supervision of exchanges and trading systems, which should aim to ensure that the integrity of trading is maintained through fair and equitable rules that strike an appropriate balance between the demands of different market participants.	FI	FI’s powers over stock exchanges as trading systems have been strengthened in recent years although weakness exist in one aspect of their business model - listings. See Principle 7.
Principle 27. Regulation should promote transparency of trading.	BI	There are challenges across Europe in achieving appropriate levels of market transparency. Sweden does not appear to derogate from the current MiFID pre and post trade transparency regime. The rating recognizes the concerns identified in Sweden and elsewhere as part of the current MiFID review on specific elements in the current regime.
Principle 28. Regulation should be designed to detect and deter manipulation and other unfair trading practices.	PI	Sanctions for violation of the criminal law are not sufficient to be fully effective, proportionate and dissuasive as required by the Principle. The NECB has a good record in obtaining prosecutions in those case it does bring to court. It may also be the case that the collateral costs of a acquiring a criminal record for insider dealing such as diminished prospects for future employment by an FI licensed firm), add to the dissuasive value of a conviction even if the direct costs are very low.
Principle 29. Regulation should aim to ensure the proper management of large exposures, default risk and market disruption.	FI	Sweden has implemented the relevant EU Directives such as the Settlement Finality Directive. Large Exposures are dealt with in the Capital Adequacy and large Exposures Act to which all banks and market intermediaries are subject. FI does not itself monitor open positions but has the right to require full information about positions from the CSD, CCP and licensed firms. The market authorities have powers to take action under their rules and regulations if necessary.
Principle 30. Systems for clearing and settlement of securities transactions should be subject to regulatory oversight, and designed to ensure that they are fair, effective and efficient and that they reduce systemic risk.	Not assessed	FI lias observed that since 2001 the clearing and settlement system for cash bonds and equities on NASDAQ OMX has been radically improved to take account of the IMF assessment at the time by introducing a gross rather than net settlement system. It is now owned by Euroclear, one of the two Europe based global ICSDs. There is a CCP for top tier stocks (ECMF) based in the Netherlands. FI has a MoU on this arrangement with the Dutch regulator.
Aggregate: Fully implemented (FI) – 17, broadly implemented (BI) – 8, partly implemented (PI) – 4, not implemented (NI) – 0, not applicable (N/A) – 0.

Table 6.

Sweden: Recommended Action Plan to Improve Implementation of the IOSCO Objectives and Principles

Table 6.

Sweden: Recommended Action Plan to Improve Implementation of the IOSCO Objectives and Principles

Principle	Recommended Action
Principle 1	Steps should be taken to clarity that insurance intermediaries wishing to sell shares, bonds, structured products and other complex products must be licensed under the SMA and mechanisms developed to get this message across to current and potential licensees.
Principle 2	The government should reconsider its policy of attaching specific short term project requirements to Parliament’s annual budget allocation for FI initially and during the course of the financial year. The government should examine the benefits of changing the basis of FI’s funding to a structure where the mix as between Parliamentary allocation and fees levied by FI is more reliant on the latter and where, subject to consultation, FI can set the fees at the level it believes is necessary to fulfill its mandates.
Principle 3	The government and FI should consult on measures to seek to ensure that FI has sufficient, and sufficiently experienced and qualified staff to meet current and predicated workloads.
	Given that FI will never be able to compete solely on salary levels it should consider how best to create career paths and a work environment which encourage staff to remain in public service beyond the time when industry finds their acquired skills and knowledge particularly desirable.
Principle 4	FI should review its internal processes by which licensees can make representations prior to the imposition of major sanctions such as license revocation.
Principle 7	Given the emergence in Sweden of competing for-profit securities exchanges which have significant self regulatory responsibilities under the law, particularly as regards listed companies, the government might wish to consider whether the time may be approaching when the need to ensure consistently applied, effective and efficient issuer regulation will require regulation of issuers on a statutory basis by a single statutory body such as FI.
Principle 9	Clarify relationship between FI and CPA.
Principle 10	FI should consider whether it has got the balance right between supervision and enforcement in its current structure. FI should consider increasing fines to dissuasive levels and review the use of its statutory discretion not to fine fund management companies because they rectify breaches.
Principle 14	See recommendation under Principle 7. FI and NASDAQ OMX should consider jointly whether the criteria under which a listed company can legitimately delay publishing price sensitive information should be given greater specificity and transparency. The government might wish to consider whether the EU standard of a maximum of 120 days for filing annual reports is adequate as a means of providing investors with useful information on the performance of a public company. Other major economies outside the EU impose significantly shorter deadlines.
Principle 15	FI might wish to consider whether the requirement for insiders to report their transactions in 5 days is too long given current technology.
Principle 16	The MoF should pursue to a definitive conclusion its review of whether for-profit securities exchanges should continue to be responsible for enforcing accounting standards on listed companies.
Principle 17	The regulation of insurance intermediaries who sell CIS should be strengthened. The FI should implement its current plans to end the provision which permits unlicensed persons to sell unapproved foreign CIS to retail investor as long as no money changes hands directly should be closed.
	FI, in consultation with the government, should take steps to increase the resources in the investment funds supervision department to a level which enables it to fully meet its mandate. Government should review the maximum level of fines and FI should review its apparent policy of forbearance in the use of fines at the top end of the range.
Principle 18	FI should vigorously argue its case in European Securities and Markets Authority (ESMA) that a custodian should not be affiliated with the management company of a UCITS. Consider the need for additional segregation requirements and detailed confirmation of assets by the independent auditor where the AMC and custodian are not at arm’s length.
Principle 21	FI, in consultation with the government should take steps to increase the resources in the securities firms supervision department to a level which enables it to fully meet its mandate.
Principle 22	Consider more timely/frequent reporting by securities firms
Principle 24	Consider giving FI the express authority to petition the court for the appointment of a receiver/administrator
Principle 25	In addition to reviewing the trading rules of a securities exchange for compliance with the SMA and its Regulations, the FI should also review and analyze the performance of the trade matching or execution algorithm of automated trading systems.
Principle 26	See Recommendation to Principle 7.
Principle 28	The Government should carry out a comprehensive review of the legal and judicial framework around the prosecution of securities market crimes to see whether steps could be taken to make the process more effective, proportionate and dissuasive.

View Table

Table 6.

Sweden: Recommended Action Plan to Improve Implementation of the IOSCO Objectives and Principles

Principle	Recommended Action
Principle 1	Steps should be taken to clarity that insurance intermediaries wishing to sell shares, bonds, structured products and other complex products must be licensed under the SMA and mechanisms developed to get this message across to current and potential licensees.
Principle 2	The government should reconsider its policy of attaching specific short term project requirements to Parliament’s annual budget allocation for FI initially and during the course of the financial year. The government should examine the benefits of changing the basis of FI’s funding to a structure where the mix as between Parliamentary allocation and fees levied by FI is more reliant on the latter and where, subject to consultation, FI can set the fees at the level it believes is necessary to fulfill its mandates.
Principle 3	The government and FI should consult on measures to seek to ensure that FI has sufficient, and sufficiently experienced and qualified staff to meet current and predicated workloads.
	Given that FI will never be able to compete solely on salary levels it should consider how best to create career paths and a work environment which encourage staff to remain in public service beyond the time when industry finds their acquired skills and knowledge particularly desirable.
Principle 4	FI should review its internal processes by which licensees can make representations prior to the imposition of major sanctions such as license revocation.
Principle 7	Given the emergence in Sweden of competing for-profit securities exchanges which have significant self regulatory responsibilities under the law, particularly as regards listed companies, the government might wish to consider whether the time may be approaching when the need to ensure consistently applied, effective and efficient issuer regulation will require regulation of issuers on a statutory basis by a single statutory body such as FI.
Principle 9	Clarify relationship between FI and CPA.
Principle 10	FI should consider whether it has got the balance right between supervision and enforcement in its current structure. FI should consider increasing fines to dissuasive levels and review the use of its statutory discretion not to fine fund management companies because they rectify breaches.
Principle 14	See recommendation under Principle 7. FI and NASDAQ OMX should consider jointly whether the criteria under which a listed company can legitimately delay publishing price sensitive information should be given greater specificity and transparency. The government might wish to consider whether the EU standard of a maximum of 120 days for filing annual reports is adequate as a means of providing investors with useful information on the performance of a public company. Other major economies outside the EU impose significantly shorter deadlines.
Principle 15	FI might wish to consider whether the requirement for insiders to report their transactions in 5 days is too long given current technology.
Principle 16	The MoF should pursue to a definitive conclusion its review of whether for-profit securities exchanges should continue to be responsible for enforcing accounting standards on listed companies.
Principle 17	The regulation of insurance intermediaries who sell CIS should be strengthened. The FI should implement its current plans to end the provision which permits unlicensed persons to sell unapproved foreign CIS to retail investor as long as no money changes hands directly should be closed.
	FI, in consultation with the government, should take steps to increase the resources in the investment funds supervision department to a level which enables it to fully meet its mandate. Government should review the maximum level of fines and FI should review its apparent policy of forbearance in the use of fines at the top end of the range.
Principle 18	FI should vigorously argue its case in European Securities and Markets Authority (ESMA) that a custodian should not be affiliated with the management company of a UCITS. Consider the need for additional segregation requirements and detailed confirmation of assets by the independent auditor where the AMC and custodian are not at arm’s length.
Principle 21	FI, in consultation with the government should take steps to increase the resources in the securities firms supervision department to a level which enables it to fully meet its mandate.
Principle 22	Consider more timely/frequent reporting by securities firms
Principle 24	Consider giving FI the express authority to petition the court for the appointment of a receiver/administrator
Principle 25	In addition to reviewing the trading rules of a securities exchange for compliance with the SMA and its Regulations, the FI should also review and analyze the performance of the trade matching or execution algorithm of automated trading systems.
Principle 26	See Recommendation to Principle 7.
Principle 28	The Government should carry out a comprehensive review of the legal and judicial framework around the prosecution of securities market crimes to see whether steps could be taken to make the process more effective, proportionate and dissuasive.