Stockholm (HedgeNordic) – The Swedish Financial Supervisory Authority, Finansinspektionen, has fined bank and internet broker Nordnet Bank SEK 100 million for violations related to its intraday short-selling service.
Finansinspektionen (FI) found that Nordnet offered a small group of its customers a larger selection of shortable shares through an intraday short-selling service than what is offered in the bank’s other short-selling services. This intraday service has been offered to the most active customers or customers with larger amounts of capital to invest. The Swedish financial watchdog also found widespread naked short selling, the practice of short selling shares that have neither been borrowed nor located.
“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.”
“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,” writes Finansinspektionen in an press release. “There has therefore been a considerable risk that the customers were short selling shares without coverage, so-called naked short selling, which is banned.” According to Finansinspektionen, Nordnet Bank has had deficiencies in its internal guidelines, procedures, risk management and risk assessment, as well as in its duty of care to customers. Nordnet has been issued a remark and an administrative fine of SEK 100 million.
“Nordnet has offered an inaccurate service that risks introducing shortcomings and problems to the securities market.”
The Finansinspektionen investigation identified that Nordnet had raised the issue of deficient procedures in its intraday short-selling service back in 2018, but continued to provide the service without rectifying all of the deficiencies. “Nordnet has offered an inaccurate service that risks introducing shortcomings and problems to the securities market,” says Susanna Grufman, the Deputy Director General at FI. “It is particularly notable that the violations in the service were raised within the bank earlier without it taking all the necessary measures,” she adds. “Nordnet’s actions can have a negative impact on the confidence that the market is well functioning.”
