Rules of Procedure for the Council for Swedish Financial Reporting Supervision

Purpose

§1
The purpose of the Council is to take steps to ensure that listed companies’ financial reporting is of high quality and is highly comparable within Sweden and internationally. The Council shall focus on protecting investors, promoting confidence in the market and avoiding regulatory arbitrage in order to maintain a well-functioning and efficient Swedish securities market.

Function

§2
As delegated by the Swedish Financial Supervisory Authority (SFSA), the Council for Swedish Financial Reporting Supervision is to review periodic financial information as referenced in Ch. 16, §§ 4-5 of the Securities Market Act (2007:528).

The Council shall comply with SFSA regulations (2028:18) regarding supervision of issuers’ periodic financial information.

In its work the Council shall comply with the terms of the agreement between the SFSA and the Association for Generally Accepted Practice in the Securities Market concerning the transfer of certain SFSA duties to the Council.

The Council shall follow European Securities and Markets Authority (Esma) guidelines for supervision of financial information (Esma/2014/1293) as applicable.

The Council shall also adhere to other Esma guidelines that pertain to the Council’s activities as applicable.

The Council shall actively participate within the framework of European Enforcers Coordination Sessions (EECS). Among other things, the Council shall present Swedish cases to EECS, enter such cases in the EECS database where relevant and submit information requested by Esma. The Council shall consult with the SFSA in order to reach a common position on issues arising from cooperation within the European Union. 

Organisation

§3
The Council is comprised of a chair, deputy chair and a minimum of five other members (reviewers).

The Council’s work activities are led by the Council’s chair. The deputy chair takes on these duties in the event of the chair’s absence. Stipulations in these Rules of Procedure regarding the chair also apply to the deputy chair when he or she is serving in the chair’s stead.

The chair shall also:

  1. -  monitor the development of regulations and common practice in the Council’s area of responsibility,
  2. -  be responsible for the Council’s quarterly contacts with the Swedish Financial Supervisory Authority and other government authorities,
  3. -  be responsible for the Council’s participation in Esma’s European coordination initiatives,
  4. -  provide information about the Council’s activities, and
  5. -  answer questions about the Council’s activities.

The chair may delegate these tasks to the deputy chair or another member and may delegate tasks specified in 4. and 5. above to the Council’s administrative staff.

Office, register and website

§4
The Council’s office is managed by the chair, who shall:

  1. -  regularly report financial information to the Association’s office manager,
  2. -  be responsible for the Council’s register and files,
  3. -  maintain a list of members’ outside activities and holdings of financial instruments related to companies under review, and
  4. -  provide instructions to the office’s administrative staff concerning their work duties.

The chair may delegate tasks specified in 1. and 2. above to the office’s administrative staff.

§5
Work at the Council’s office is carried out by an administrative staff specifically employed for this purpose.

§6
The Council’s office shall maintain a register in which cases it deals with are regularly recorded. Documents pertaining to a review case shall be filed and retained for ten years, after which the documents shall be destroyed.

Registered documents pertaining to a review case shall be submitted to the Swedish Financial Supervisory Authority upon written request.

§7
The office normally has telephone hours on weekdays between 9:00 AM and 12:00 noon. Telephone hours may change during holiday periods and in connection with bankholidays.

§8
The Council maintains a website through which the Council provides information about its composition, activities, statutes, rules of procedure and principles regarding collection of fees. The Council’s final positions and annual reports of reviews conducted shall also be published on the website.

Budget

§9
The Council’s budget is determined by the Association based on a proposal from the Council’s chair and in consultation with the Association’s office manager.

Selection

§10
The chair is responsible for ensuring that the selection of companies included in the population for review is done in accordance with European Securities and Markets Authority (Esma) guidelines on supervision of financial information.

A company shall be taken up for review upon the written request of the Swedish Financial Supervisory Authority.

Proceedings and co-chair group

§11
Cases are handled in proceedings under the direction of a group of co-chairs.

The group of co-chairs is comprised of the Council’s chair, deputy chair and a third member appointed on a rotating basis from among the other members of the Council. The Council’s chair and deputy chair normally chair the co-chair group in turns.  

In the event the chair or deputy chair has a conflict of interest or is otherwise prevented from participating, he or she is replaced by a third member appointed from among the other members on a rotating basis. This rotation follows a pre-determined rotation list drawn up by the Council’s chair and deputy chair. The order of selection on the rotation list has been determined by drawing lots.

From among the Council’s other members, the co-chair group appoints a member responsible for the review and a member responsible for quality assurance of the proceedings. The responsible reviewer and the quality assurer may not be members of the proceeding’s group of co-chairs.

The co-chair group may decide to include external expertise on specific issues, such as incentive programmes and valuation of assets or contracts.

Distribution of review cases

§12
Review cases are distributed to the various proceedings by drawing lots. A case may be transferred from one proceeding to another if doing so is justified due to a member’s conflict of interest, the nature of the case or some other reason.

Testing members for conflict of interest

§13
When testing members for conflicts of interest in specific review cases, it is primarily the concerned member who assesses whether he or she is disqualified. Council members shall comply with the provisions of §§ 16-18 of the Administrative Procedure Act (2017:900) regarding conflict of interest. Conflicts of interest are reported to the Council’s chair.

In conjunction with the conflict of interest test for specific review cases, the Council’s chair conducts an additional conflict of interest test of Council members. The test of the deputy chair is conducted by the Council’s chair. The test of the Council’s chair is conducted by the deputy chair. Conflict of interest tests shall be documented by recording details of the tests conducted for each review case.

In the conflict of interest test, the Council’s chair shall pay particular attention to the provisions of § 16 of the Administrative Procedure Act (2017:900) regarding conflict of interest. Furthermore, each of the following situations normally signifies that a member has a conflict of interest in a specific review case (list is not exhaustive):

A)    In relation to companies under supervision:

a. The member or a related party holds a not insignificant number of financial instruments or has other significant financial interest in the company.  

b. The member has been employed by the company or the member or a related party has been part of the company’s management team or board of directors during the past three years.

c. The member or a related party has during the past three financial years served as adviser in connection with or has participated in   

                     i.      preparation of the company’s financial reports or reporting system, or
                    ii.      the company’s internal audit

d. The member or a related party has during the past three financial years served as adviser to the company on issues relating to law, taxation or valuation and this work cannot be considered insignificant in scope.  

B)     In relation to the external accounting firm of the company under supervision:

a. The member or a related party has during the past three financial years served as the responsible external auditor for the company or participated in the company’s external audit and this work cannot be considered insignificant in scope, or

b. The member or a related party has during the past three years been a partner or board member of the company’s external accounting firm.

Handling of cases

§14
In handling cases the Council applies the following provisions of the Administrative Procedure Act (2017:900):
   - §§ 16-18 regarding conflict of interest,
   - § 24 regarding when verbal information may be provided, 
   - § 25 regarding communication, 
   - § 27 regarding documentation of information, 
   - § 31 regarding documentation of decisions, 
   - § 32 regarding justification for decisions, 
   - § 33, ¶¶ 1 and 3 regarding notification of contents of decisions, 
   - § 36 regarding corrections to clerical and similar errors,
   - § 37, ¶ 1 regarding circumstances in which a public authority may amend a decision, and
   - § 38 regarding circumstances in which a public authority shall amend a decision.

§15
The Council notifies the issuer whose periodic financial information is subject to review.

The Council handles cases primarily in written form. Verbal negotiations may be included. In the event a company requests a physical meeting, we are happy to arrange this to the extent time and resources allow.

§16
The basic principle is that a specific constellation of members may not be involved in more than one proceeding. However, exceptions may be made in the event a member is found to be in conflict of interest with a case under review.

§17
When the responsible reviewer has completed the review, he or she reports the preliminary position in a review report and a memo and submits these documents to the quality assurer who, following the quality assurance process, submits the documents to the co-chair group, which calls a meeting to consider the case and determine its final position.

The co-chair group shall strive for agreement when deciding on its final position. If agreement cannot be reached, the co-chair group shall produce two proposals for final position and adopt the proposal that receives the majority of the co-chair group’s votes.

§18
In the event the group of co-chairs finds in its review that a company has failed to prepare its financial information in accordance with applicable regulations and the errors are not minor, the co-chair group shall immediately inform the Swedish Financial Supervisory Authority and submit all recorded documentation for the case to the Authority. The group of co-chairs shall inform the company that the case has been handed over and the respect in which the group considers that the company has violated the relevant regulations.

§19
In the event the violation is considered minor, the co-chair group will request in writing that the company either correct the observed errors in future financial reports or publish a specific correction. The issuer shall also be informed in writing that the case will be handed over to the Swedish Financial Supervisory Authority (SFSA) for assessment in the event the issuer fails to comply with the co-chair group’s request.

A copy of the request shall be sent to the SFSA to apprise them of the situation.

In the event the company fails to comply with the co-chair group’s request, the case shall be handed over immediately to the SFSA.

Decisions taken under §19 are published on an ongoing basis on the Council’s website.

§20
In conjunction with the finalisation of a case, the group of co-chairs may, irrespective of the detection of any errors, make recommendations regarding the company’s future financial reports.

§21
In the event the company fails to cooperate – for example, by failing to provide the documents requested or failing to respond to questions – the co-chair group shall close the case and hand it over to the Swedish Financial Supervisory Authority.

§22
The Council produces an annual report each year specifying the reviews conducted. The report is submitted to the Swedish Financial Supervisory Authority, published on the Council’s website and presented at a seminar or similar forum.  

Committees

§23
The Council’s chair may set up committees to support the Council’s activities. The committees shall have specific dedicated tasks, such as international cooperation, media monitoring and market analysis to pick up on potential infractions by companies under supervision, production of amendments to the rules of procedure, and management of complaints from companies under supervision or other external parties.

A committee shall be comprised of at least 3 members and committee work shall be led by the Council’s chair or deputy chair.

Business entertainment, gifts, seminars, travel and conferences

§24
Business entertainment is utilised to support and develop the Council’s activities and to look after the Council’s relationships with key stakeholders. Good judgement shall be applied when using business entertainment and such entertainment shall be moderate and have a connection to the Council’s activities.  

§25
Good judgement shall be applied when using internal entertainment and such entertainment shall be moderate.

§26
Council employees shall act objectively and impartially in their contacts with individual persons, organisations and companies within the scope of Council activities. 

§27
Council employees may not accept gifts, remuneration or other benefits from external parties within the scope of Council activities. They may, however, accept flowers, boxes of chocolate or similar items of minor value given as gifts to all Council employees.

§28
In the event a company under supervision, a stakeholder or a business contact arranges a seminar, informational meeting or similar event for a large audience to which a Council employee is invited, and event guests are offered food and drink or some form of moderate entertainment, this is not considered a prohibited gift, remuneration or benefit to the extent the main purpose of the event is to provide information.

§29
Council employees shall not accept invitations for travel or conferences offered by an external party. If such travel is necessary or can be considered advantageous to the employee’s work and the Council’s chair has approved the trip, the Council shall pay the travel costs.

§30
In the event of any uncertainty regarding what may be regarded as permissible under §§ 24-29 above, the employee shall consult the Council’s chair.

Authorisation of expenses

§31
Council employees’ expenses are authorised by the chair or deputy chair.

The deputy chair’s expenses are authorised by the chair.

The chair’s expenses are authorised by the deputy chair.

Holding of financial instruments related to companies under supervision  

§32
At the beginning of the employment period, employees shall notify the chair regarding financial instruments related to companies under supervision held by them or a related party and shall update the chair as to changes to any such holdings. The term “related parties” in this context pertains to spouse/domestic partner and children living at home.

Outside activities

§33
Council members may not hold any other position or job or carry out any activity that may interfere with confidence in his or her independence or that may adversely affect the Council’s reputation.

Council members shall notify the Council’s chair of their outside activities and other circumstances significant in assessing the member’s independence.

The Council’s chair determines a member’s (reviewer’s) capacity to engage in outside activities and applicable cooling off period requirements.

The Council’s chair and deputy chair shall submit corresponding information about themselves to the Association’s chair, who determines the chair’s and deputy chair’s capacity to engage in outside activities and applicable cooling off requirements.

The cooling off period is normally three years.

Confidentiality

§34
All Council employees and contractors are subject to a duty of confidentiality pursuant to Ch. 16 § 13 of the Securities Market Act (2007:528) and, unless authorised to do so, may not disclose or utilise information regarding another person’s business or personal circumstances to which he or she has become privy by virtue of his or her employment or assignment.

§35
All Council employees shall comply with these Rules of Procedure and shall annually confirm in writing that they have read the Rules of Procedure and understand their meaning.

§36
The Council will call the Swedish Financial Supervisory Authority to quarterly meetings to exchange information.

§37
Amendments to these Rules of Procedure are decided upon together by the Council’s chair and deputy chair. The Swedish Financial Supervisory Authority shall be notified in good time regarding proposed amendments.  

Rules of Procedure adopted 9 April 2019