Conclusion Of Amsterdam Exchanges' Investigation: AOT Violated Listing And Issuing Rules

In November 1999 Amsterdam Exchanges started an investigation into AOT's possible violation of section 28h of the Listing and Issuing Rules in connection with a reference to AOT's profit forecast statement of 21 July 1999 made by Mr S.L. de Boer, chairman of the board of AOT, in an interview with the magazine Beursplein 5 on 27 September 1999 and the substantially lower operating results published after the interview on 21 October 1999. This investigation has now been concluded. Since this investigation was started before the Listing and Issuing Rules Advisory Committee was set up, AOT was asked to agree that Amsterdam Exchanges would submit the results of this investigation to the Listing and Issuing Rules Advisory Committee for review. However, AOT stated that it would prefer the matter to be dealt with immediately by Amsterdam Exchanges' board of directors. On the basis of the information available, Amsterdam Exchanges has concluded that AOT violated section 28h of the Listing and Issuing Rules. Under section 28h of the Listing and Issuing Rules, issuers must immediately publish all facts or events relevant to them which are likely to have a material effect on their share price. Although AOT argued that the nature of its activities, and in particular the volatile nature of its revenues, meant that on 27 September 1999 the board of directors did not have enough insight into the company's financial situation for the third quarter of 1999 to make a statement on this matter in the form of a profit warning, Amsterdam Exchanges took the view that the negative trend in results must have already been clearly visible. The downturn in profits could have been identified before the closing of the third quarter if AOT had an adequate reporting system that could pinpoint at an early stage what the financial impact would be of a change to profit-sharing obligations. AOT's press release of 21 October 1999 stated that turnover generated at Amsterdam Exchanges clearly lagged behind expectations, and the press release issued on 21 July 1999 predicted lower turnover for the second half of 1999. This was evidently a trend which could be foreseen at that early stage. It would therefore be unrealistic to assume that the downturn in results could be reversed in the four trading days remaining in the third quarter. Finally, the press release of 21 October 1999 stated that AOT was faced with the choice of either disposing of AOT Vienna or investing in it. Both alternatives would entail costs that could have been foreseen before the closing of the third quarter. In view of the previously-published profit forecast, Amsterdam Exchanges believes that AOT had a responsibility to issue a profit warning before the closing of the third quarter. Finally, in Amsterdam Exchanges' opinion AOT did not exercise the appropriate level of care with regard to the reference to the profit forecast of 21 July 1999 made in the interview with Beursplein 5 on 27 September 1999. Owing to the lack of insight into trends in profit at that time, AOT should have emphasised that the forecast of 21 July 1999 had to be viewed in the light of market conditions at that time and that a profit-forecast statement made at that time would not necessarily prove accurate, particularly given the volatile nature of the securities trading activities on which AOT is dependent for its revenues to a significant extent.