State-run Borse Dubai violated Swedish takeover law in the run-up to a bid for exchange owner OMX but no action against the group is planned, a Swedish regulator said on Thursday.
Sweden's Financial Supervisory Authority said that in deciding later whether to block any purchaser from buying OMX it would take into account anything that might affect its view of a potential owner.
But a regulatory official declined to comment directly on how the breach would be viewed.
Borse Dubai, which has bid $4 billion for OMX, is locked in a battle with U.S. exchange Nasdaq to buy the Nordic operator.
Nasdaq has made an agreed cash-and-shares offer currently valued at $3.7 billion.
The regulator said Borse Dubai breached the law when it first announced it was buying shares in OMX, but as the group followed that up with a formal bid it would not take action.
Borse Dubai acknowledged the ruling and said it looked forward to working with the regulator as its bid progressed. It said it still believed its 230 crown offer was in the best interest of OMX and its shareholders.
OMX and Nasdaq declined to comment on the ruling.
The regulator had been investigating whether the announcement, made in a press release, constituted a formal bid and as such whether Borse Dubai should have filed an offer document.
"Borse Dubai's press release announced on Aug 9, 2007 was a public takeover bid. As a consequence, Borse Dubai has breached the Act on Takeovers in the stock market," the regulator said in a statement. "Borse Dubai has subsequently complied with the act therefore no further action will be taken."
The Aug. 9 statement from Borse Dubai, run by former OMX Chief Executive Per Larsson, said it had begun a book-building process in OMX and had entered agreements to buy shares at 230 crowns each as it aimed to amass a stake of 25 percent.
Later that day it said it had bought 4.9% of OMX and had agreements to buy 22.5% more.
Borse Dubai also breached Swedish rules by amassing 10% in OMX without applying to the regulator before doing so. It unveiled its offer for OMX, which runs exchanges in Sweden, Denmark, Finland, Iceland and the Baltic states, on Aug. 17.
OMX shares strengthened on Thursday, rising 1 crown to 243.00 to trade well above the Borse Dubai bid level.
Asked at a news conference whether the breach would affect Borse Dubai's chances of buying OMX, an official from the regulator said everything that could affect its view of the qualifications of a potential owner would be considered.
"Everything that might have an impact on whether or not we deem the qualified owner to jeopardize the sound business -- that should be taken into account," said Gent Jansson, deputy director general at the regulator.
Investors have little in the way of precedent to help them evaluate the seriousness of the issue for Borse Dubai. "I can confirm that we haven't experienced a situation like this before," Jansson said.
Erik Nerep, a law professor at Stockholm School of Economics, said he believed Borse Dubai had got off lightly.
"I understand that they don't want to forbid Borse Dubai from buying OMX, but it is surprising that there is not even a fine," he said. "The usual punishment is a fine. It can be anything from 50,000 crowns to 100 million, depending on the case."
Nasdaq plans to sell its stake in the London Stock Exchange and it believes this will boost the value of its stock and improve its offer for OMX as a result.
Borse Dubai is a holding company for the Dubai government's stakes in Dubai Financial Market and the Dubai International Financial Exchange.