The Frederiksberg District Court has today ruled in favour of FLSmidth & Co. A/S with regard to its disclosure procedures for new orders according to Section 27, subsection 1 of the Danish Securities Trading Act.
The case concerns the release of a stock exchange message in November 2007 when 20 hours passed from a journalist asked FLSmidth & Co. A/S to verify rumours of a contract in Russia until FLSmidth & Co. A/S issued a stock exchange message regarding the same contract before the Stock Exchange opened for trading on 7 November 2007.
Since the Financial Supervisory Authority reported the case to the prosecutor in 2007, it has been modified in that the prosecution has decided to widen the scope by maintaining that the conditional contract should have been disclosed publically already at the time of signature, in other words long before the journalist heard rumours of the contract.
FLSmidth is continuously awarded contracts that in most cases are subject to very significant conditions concerning, for example, the submission by FLSmidth of bank guarantees to the customer and the receipt by FLSmidth of prepayment from the customer. Since for various reasons a not insignificant portion of such conditional orders never materialises, the FLSmidth & Co. A/S Board and Management has for many years adopted the practice, which it has announced and had approved by the Copenhagen Stock Exchange in 2005, not to recognise, start working on nor publically disclose such orders until the contract has become effective, ie. when the above-mentioned conditions of the contract have been fulfilled. By doing so, FLSmidth & Co. A/S wishes to ensure that the information disclosed to the stock market regarding new orders and order backlog is timely and reliable and that the orders announced by the company are in accordance with those booked.
With its judgment today, the Frederiksberg District Court has dismissed the prosecution’s claim and established that the practice adopted by FLSmidth & Co. A/S not to publically disclose an order until the significant conditions of the contract have been fulfilled does not conflict with Section 27, subsection 1 of the Danish Securities Trading Act.