Swedish smaller companies funding warning after court decision
The outcome of a Swedish appeal court case involving a financial scam linked to a company with a claimed technology for mining gravel will make it harder for local smaller companies to obtain financing via markets such as Aktietorget, NGM och First North, according to comments from the Swedish Shareholders’ Association (Sveriges Aktiesparares Riksförbund).
The Svea Court of Appeal in Stockholm, (Svea Hovrätt, one of six in the country) noted in its judgement of Friday 11 May that the case involved a significant scam that had resulted in long prison sentences being handed down by Nacka District Court (Nacka Tingsrätt). It also noted that the prosecutor in the case had argued that those involved in the case had deliberatly ramped up the value of shares in the company, NRS Technologies, via misleading results statements and press releases.
However, on appeal, the court found that the prosecution had not fully proven that those involved had been aware that the statements were of a misleading nature, and consequently freed those involved in the case. (http://www.svea.se/Om-Sveriges-Domstolar/Pressrum/Nyheter-och-pressmeddelanden/Svea-hovratt-frikanner-samtliga-tilltalade-i-ett-stort-svindlerimal-mal-B-1317-11/)
Shareholders’ Association managing director Günther Mårder is quoted in local business newspaper Dagens Industri saying that this outcome is a poor one for investors in Swedish smaller companies.
“I think the mistrust will increase towards smaller companies,” he said.
He believes that a key outcome of the appeal is that Swedish smaller companies will find it harder to raise funds via markets.
The Shareholders’ Association website shows that the organisation has followed he case from its beginnings back in 2006, because it was a widely held small cap stock. Trading in the shares were halted on 27 March that year, with accountants at Öhrlings Pricewaterhouse Cooper brought in to review the books. That review found that the company’s production and delivery forecasts were highly unlikely to be met. (http://www.aktiespararna.se/artiklar/Reportage/Svindlande-turer-kring-NRS/)
By 2009 the Association reported that Swedish regulator Finansinspektionen (the Swedish Financial Supervisory Authority) was demanding payment of SEK350,000 from NRS Technologies’ then chairman and chief owner Alexander Richards for failing to delare an insider deal worth SEK7m. The Swedish Economic Crime Authority (Ekobrottsmyndigheten) was at that stage also investigating Richards for insider crimes and financial scams. (http://www.aktiespararna.se/artiklar/Reportage/Svindleri-och-insiderbrott/)
Newspaper Dagens Nyheter noted following the appeal that Richards was still found guilty of breaking accounting rules for late reporting of annual accounts, but that limits previously imposed on acting in a business capacity were lifted.