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Finanstilsynet has sent a letter to investment firms, to remind them of their duty to report risk and to ensure that clients have the knowledge and experience necessary to understand risk when trading stocks.
This is what Finanstilsynet wrote in a press release Thursday.
Listing tree
The reason the audit is now tightening the brokerages is that in 2020 there has been a sharp increase in the number of companies listed on the Merkur “mini-exchange” market. Unlike, for example, Oslo Børs and Oslo Axess, which are regulated markets, Merkur Market is a so-called “multilateral trading mechanism”, which requires less stringent admission requirements for listed companies and that many of the provisions of the Securities Trading Act do not apply. as they do in regulated markets.
Of the 50 companies listed on Merkur Market, 31 companies were listed in 2020, according to the Oslo Stock Exchange. Finanstilsynet also writes that the trading venue has received increased attention from investors this year, DN wrote in August this year that the number of young shareholders had doubled since January 2019.
Investment firms, such as brokerages, are required to provide clients and potential clients with good guidance and a clear warning about the risk of trading stocks. At the same time, the companies themselves must ensure that clients have the knowledge and experience necessary to understand the risk associated with any investment, writes Finanstilsynet.
– Dramatic change
Earlier this month, DN announced a change in the way new investors trade stocks. Aksje Norge CEO Kristin Skaug warned inexperienced investors not to uncritically jump into the wave of publicly traded companies.
– There are some danger signs when there are so many inexperienced investors investing their money in startups. You have to understand that it is a long-term investment and bear in mind that many of the companies in Merkur Market are companies in a phase where they depend on obtaining contracts and starting to obtain a stream of income, Skaug told DN at the time .
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- There may be few shareholders in the companies and, therefore, little flow in the action; you may have trouble selling if it falls.
- Early stage entrepreneurs or investors can sell out suddenly, creating uncertainty about the business and its ability to raise more capital.
- Many of the companies are in new industries that are still in a growth phase and depend as much on technological development as on public support and facilitation schemes.
- Many of the companies have a short history and therefore it can be difficult to assess future revenue trends.
