In the early spring of 2016, the Finnish Ministry of Finance debated a new act on bondholders’ representation. The debated act applies to security agent functions and trustee activities in connection with bonds and other collective finance arrangements.
In the early spring of 2016, the Finnish the Ministry of Finance debated a new act on bondholders’ representation. The debated act applies to security agent functions and trustee activities in connection with bonds and other collective finance arrangements. According to the Ministry of Finance, the aim of the law is to enhance the functionality of the bond market, improve conditions for corporate financing, diversify the financial market and increase investor protection. The proposal has gone through consultations within governmental bodies and the financial industry, one of the consulted being Sami Miettinen, CEO of Nordic Trustee Oy, who now also is a permanent expert of the Ministry of Finance taskforce pursuing this mandate.
Conditions for Registration as a Bond Trustee
Under the proposal, only an entity registered in a special register upheld by the Finnish Financial Supervisory Authority could act as a bondholder trustee, if, in connection with the bond issue, a prospectus has been published or is going to be published within the meaning of the Securities Markets Act. The conditions for registration are defined in the proposed law and the requirements should, among other things, be that the entity to be registered is trustworthy and that it has sufficient knowledge of the bond and financial markets. Further, the agent shall treat the bondholders equally and the agent shall not violate the principle of good financial market practice in the Securities Markets Act.
Rights and Obligations
According to the act, the bond trustee may be granted an array of rights through the bond agreement. These include the right to bring legal proceedings against the issuer on behalf of the bondholders or other third parties, such as filing for involuntary bankruptcy of the issuer, representing the bondholders at the issuer's bankruptcy proceedings. In addition, the bond trustee will have the right to manage transaction securities for the benefit of the bondholders.
The law imposes a number of obligations on the bond trustee, such as reporting requirements and an obligation to keep collateral and customer funds separate from the bond trustees own funds. In addition, the law provides a mechanism for the withdrawal and change of the bond trustee. The law would be a highly welcomed improvement for the Finnish and Nordic bond market.
The proposed law is intended to come into force in the summer of 2017.