CASE-LAW OF THE COURT OF JUSTICE OF THE EUROPEAN UNION ON MARKET ABUSE AT EUROPEAN LEVEL Текст научной статьи по специальности «СМИ (медиа) и массовые коммуникации»

13. МЕЖДУНАРОДНОЕ ПРАВО; ЕВРОПЕЙСКОЕ ПРАВО

12.00.10

DOI: 10.33693/2541-8025-2020-16-5-294-313

13.1. Case-law of the Court of Justice of the European Union on Market Abuse at European Level

©Libor Klimek Matej Bel University, Banska Bystrica, Slovak Republic e-mail: libor.klimek@umb.sk

Abstract. A set of legislative instruments regulating market abuse have been adopted by the European Union. The principal contemporary legislative instrument in this field, addressed to its Member States, is the Regulation No 596/2014 of the European Parliament and of the Council on market abuse. Legislation has been supplemented by the case-law of the Court of Justice of the European Union (formerly known as the Court of Justice of the European Communities). It is a key element for the development of legal practice in all Member States of the European Union. The assessment of case-law on market abuse is therefore needed. The paper analyses relevant cases. In each case at the outset a reference for a preliminary ruling is mentioned. Further, dispute in the main proceedings and the question(s) referred for a preliminary ruling are analysed. The most important parts of analyses are considerations by the Court of Justice and its rulings.

Keywords: market abuse at European level, case-law, Court of Justice of the European Union, case C-28/99 - Verdonck and others, case C-384/02 - Knud Gr0ngaard and Allan Bang, case C-391/04 - Charilaos Georgakis, case C-45/08 - Spector Photo Group and Chris Van Raemdonck, case C-445/09 - IMC, case C-19/11 - Markus Geltl, case C-628/13 - Jean-Bernard Lafonta.

For citation: Libor Klimek Case-law of the Court of Justice of the European Union on Market Abuse at European Level // Economic problems and legal practice. 2020. Vol. 16. №5. P. 294-313. (in Russ.) DOI: 10.33693/2541-8025-2020-16-5-294-313.

DOI: 10.33693/2541-8025-2020-16-5-294-313

Прецедентное право суда Европейского союза по вопросам злоупотребления рынком на уровне ЕС

©Либор Климек Университет Матея бела, Банска-Бистрица, Словацкая Республика e-mail: libor.klimek@umb.sk

Аннотация. Европейский союз принял ряд законодательных актов, регулирующих злоупотребление рынком. Основным современным законодательным актом в этой области, адресованным государствам-членам, является Постановление № 596/2014 Европейского парламента и Совета по злоупотреблениям на коммерческом рынке. Законодательство было дополнено прецедентным правом суда Европейского союза (ранее известного как Суд Европейских сообществ). Это ключевой элемент для развития юридической практики во всех государствах-членах Европейского союза. Поэтому необходима оценка прецедентного права в отношении злоупотреблений на рынке. В статье анализируются соответствующие случаи. В каждом случае с самого начала упоминается ссылка на соответствующее постановление. Далее анализируются конкретный кейс и вопросы, вынесенные на обсуждение для принятия предварительного решения. Наиболее важными частями анализа являются размышления суда и его постановления.

Ключевые слова: злоупотребление рынком на уровне ЕС, прецедентное право, Суд Европейского союза, дело с-28/99 - Вер-донк и другие, дело с-384/02 - Кнуд Гренгаард и Аллан Банг, дело с-391/04 - Харилаос Георгакис, дело с-45/08 - Спектор фото Груп и Крис Ван Рэмдонк, дело с-445/09 - IMC, дело с-19/11 - Маркус Гелтл, дело с-628/13 - Жан-Бернар Лафонта.

Для цитирования: Либор Климек Прецедентное право суда Европейского союза по вопросам злоупотребления рынком на уровне ЕС // Проблемы экономики и юридической практики. 2020. Т. 16. №5. С. 294-313. DOI: 10.33693/2541-8025-2020-16-5-294-313.

INTRODUCTION

The European Union is the opinion that a genuine internal market for financial services is crucial for economic growth and

job creation. An integrated, efficient and transparent financial market requires market integrity. The smooth functioning of securities markets and public confidence in markets are pre-

requisites for economic growth and wealth. Market abuse harms the integrity of financial markets and public confidence in securities and derivatives.

The principal legislative instrument regulating market abuse at the level of the European Union is the Regulation No 596/2014 of the European Parliament and of the Council on market abuse1 [hereinafter «Regulation (EU) No 596/2014 on market abuse»]. This Regulation establishes a common regulatory framework on insider dealing, the unlawful disclosure of inside information and market manipulation (market abuse) as well as measures to prevent market abuse to ensure the integrity of financial markets in the EU and to enhance investor protection and confidence in those markets.2 This Regulation aims at contributing in a determining manner to the proper functioning of the internal market and is based the Treaty on the Functioning of the EU3.4

The Regulation (EU) No 596/2014 on market abuse is the newest and contemporary legislative instrument regulating market abuse. It replaced and repealed the Directive 2003/6/EC on insider dealing and market manipulation5 (hereinafter «Directive 2003/6/EC on market abuse»), which replaced and repealed the Directive 89/592/EEC coordinating regulations on insider dealing6 (hereinafter «Directive 89/592/EEC on insider dealing»). Besides these legislative instruments were adopted also the Directive 2003/124/EC implementing the Directive 2003/6/EC as regards the definition and public disclosure of inside information and the definition of market manipulation7 (hereinafter «Directive 2003/124/EC implementing the Directive 2003/6/EC») as well as the Directive 2004/39/EC on markets in financial instruments amending some directives8 (hereinafter «Directive 2004/39/EC on markets in financial instruments»).

Mentioned legislative instruments have been supplemented by the case-law of the Court of Justice of the European Union (formerly known as the Court of Justice of the European Communities). The work analyses relevant cases, which have impact on legal practice.

1 Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC as amended by the Regulation (EU) 2016/1033. Official Journal of the European Union, L 173/1, 12 June 2014.

2 Article 1 of the Regulation (EU) No 596/2014 on market abuse.

3 Treaty on the Functioning of the European Union as amended by the Treaty of Lisbon. Official Journal of the European Union, C 83/47 of 30 March 2010.

4 Under Article 114 of the Treaty on the Functioning of the European Union the European Parliament and the Council of the European Union shall adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States of the EU which have as their object the establishment and functioning of the internal market.

5 Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation (market abuse). Official Journal of the European Union, L 96/16, 12 April 2003.

6 Council Directive 89/592/EEC of 13 November 1989 coordinating regulations on insider dealing. Official Journal of the European Communities, L 334/30, 18 November 1989.

7 Commission Directive 2003/124/EC of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards the definition and public disclosure of inside information and the definition of market manipulation. Official Journal of the European Communities, L 339/70, 24 December 2003.

8 Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC. Official Journal of the European Communities, L 145/1, 30 April 2004.

Judgment of the Court of Justice of the European Communities of 3 May 2001 - Case C-28/99 - Verdonck and Others

Reference for a Preliminary Ruling. By judgment of 27 January 1999, received at the Court on 5 February 1999, the Court of First Instance in Ghent (Rechtbank van Eerste Aanleg te Gent) referred to the Court of Justice three questions on the interpretation of Article 6 of the Directive 89/592/EEC on insider dealing.

Those questions were raised in the course of criminal proceedings brought against Mr Verdonck, Mr Everaert and Mrs De Baedts (hereinafter «the defendants in the main proceedings» or «the defendants»), who are charged under Articles 181, 182, 183 and 189 of Belgian Law on Financial Transactions and Financial Markets of 1990. Those provisions define and punish insider crime.

Dispute in the Main Proceedings and the Questions Referred for a Preliminary Ruling. At its meetings of 22 August and 10 October 1995, the board of directors of Ter Beke NV (hereinafter «Ter Beke») considered the possibility of taking over Chilled Food Business, a division of Unilever Belgium NV (hereinafter «Unilever»). On 14 September 1995, a tentative offer was made and, on 19 December 1995, the board of directors of Ter Beke approved a bid to take over Chilled Food Business.

On 5 March 1996, Ter Beke and Unilever signed a letter of intent, made public on the same day, in which they expressed their wish to continue their existing discussions on an exclusive basis. Between 5 March 1996 and 18 March 1996, following the publication of the letter of intent, the price of shares in Ter Beke rose from 2 800 to 3 230 BEF (Belgian francs - former Belgian currency), an increase of 15.3%.

On 14 May 1996, Ter Beke and Unilever signed an acquisition agreement relating to Chilled Food Business.

It is apparent from the judgment of the national court that the defendants are directors of the board of Ter Beke and that Mr Verdonck is also a member of the company's management committee. Between 6 and 8 February 1996, the defendants placed orders on the stock exchange which resulted in the acquisition of shares in Ter Beke at a price of 2 590 BEF.

The Public Prosecutor (Openbaar Ministerie) brought proceedings against the defendants before the Court of First Instance in Ghent (Rechtbank van Eerste Aanleg te Gent) on the ground that, by purchasing shares in Ter Beke before the letter of intent between itself and Unilever was made public, they made unlawful use of inside information, contrary to Articles 181, 182, 183 and 189 of the Law on Financial Transactions and Financial Markets of 1990.

In their defence, the defendants argued, among others, that the Law on Financial Transactions and Financial Markets of 1990 is inconsistent with the Directive 89/592/EEC on insider dealing in that, by laying down a more stringent definition of insider dealing than the directive, whilst at the same time providing that information in the possession of holding companies does not amount to inside information for the purposes of the offence of insider dealing, the Law on Financial Transactions and Financial Markets of 1990 contravenes Article 6 of the Directive 89/592/EEC on insider dealing, which authorises the Member States to adopt more stringent provisions than those laid down in the directive only if such provisions are applied generally.

Taking the view that judgment in the case depended on the interpretation of Article 6 of the Directive 89/592/EEC on insider dealing, the Court of First Instance in Ghent (Rechtbank van Eerste Aanleg te Gent) stayed the proceedings and referred the following three questions to the Court of Justice for a preliminary ruling:

1. Does Article 6 of the Directive 89/592/EEC on insider dealing, which reads: «Each Member State may adopt provisions more

stringent than those laid down by this directive or additional provisions, provided that such provisions are applied generally... », allow a Member State to provide for a more stringent definition in its legislation, whilst granting a given category, namely holding companies, specific exemption from that more stringent definition?

2. Is the implementation of the Directive 89/592/EEC on insider dealing, transposed in Belgium by Article 181 of the Law on Financial Transactions and Financial Markets of 1990, compatible with Article 6 of the directive? Article 181 reads as follows:

«Inside information, for the purposes of this Code, shall mean information which has not been made public, of a sufficiently precise nature, relating to one or several issuers of transferable securities or other financial instruments or to one or several transferable securities or other financial instruments, which, if it were made public, would be likely to have a significant effect on the price of the transferable security or securities or the other financial instrument or instruments in question.

Inside information does not include information which holding companies possess because of their role in the management of companies in which they have a shareholding, unless it is information which must be made public pursuant to the statutory and regulatory provisions concerning the obligations arising from admission to the official listing of transferable securities on a stock exchange.

The provisions of this Code shall apply to the transferable securities and other financial instruments referred to in Article 1».

3. If the Member State has implemented the Directive 89/592/EEC on insider dealing as the Belgian legislature has done in Article 181 of the Law on Financial Transactions and Financial Markets of 1990, and such implementation is contrary to the directive, does this mean that the more stringent provisions are deemed not to form part of the national legislation, or that they remain fully applicable, and to holding companies as well?

Consideration9 by the Court of Justice: The First and the Second Questions. By its first two questions, which can be considered together, the national court is asking essentially whether Article 6 of the Directive 89/592/EEC on insider dealing is to be interpreted as not precluding a Member State from applying legislative provisions on the prohibition of use of inside information which are more stringent than those laid down by that Directive, but which at the same time exclude a certain category of information in the possession of holding companies from the definition of inside information contained in that legislation.

The defendants in the main proceedings, the Belgian and Portuguese Governments and the European Commission are agreed that, in so far as the Law on Financial Transactions and Financial Markets of 1990 does not require that an insider use inside information in his possession with full knowledge of the facts, and thus also covers unintentional use of inside information, its definition of the prohibited use of inside information is more stringent than that in Article 2(1) of the Directive 89/592/EEC on insider dealing.

There are, however, differences of opinion over the question whether the Law on Financial Transactions and Financial Markets of 1990 complies with Article 6 of the Directive 89/592/EEC on insider dealing, which permits provisions that are more stringent than those laid down in the directive only on condition that such provisions are «applied generally».

9 See also: Opinion of Advocate General Léger delivered on 12 October 2000 -Case C-28/99 - Public Prosecutor (OpenbaarMinisterie) (Belgium) versus Jean Verdonck and Others.

The defendants and the Portuguese Government submit that that question should be answered in the negative. They argue that the provisions of the Law on Financial Transactions and Financial Markets of 1990 at issue in the main proceedings, which they consider to be more stringent, do not apply to a specific category of companies and are not therefore applied generally, within the meaning of Article 6.

For its part, the Belgian Government submits, in essence, that the second paragraph of Article 181 of the Law on Financial Transactions and Financial Markets of 1990 merely makes clear, for holding companies, which confidential information in their possession, in particular information concerning their subsidiaries, constitutes inside information and which information is not inside information. By classifying as inside information any information in the possession of holding companies which must be made public pursuant to the statutory and regulatory provisions of national law concerning the obligations arising from admission of transferable securities to official listing on a stock exchange, Article 181 of the Law on Financial Transactions and Financial Markets of 1990 does no more than give a definition corresponding to the general definition of inside information set out in Article 1(1) of the Directive 89/592/EEC on insider dealing. The information which must be made public pursuant to those provisions of national law is precisely the information which would be likely to have a significant effect on the price of the transferable securities in question, referred to in Article 1(1) of the Directive.

In this connection, the Belgian Government argues that, in the version in force at the time of the offence with which the defendants in the main proceedings are charged, the first indent of Article 4(1) of Royal Decree No. 2331 of 18 September 1990 on obligations arising from the listing of transferable securities on the primary market of a Belgian stock exchange imposed an obligation on companies whose shares were admitted to official listing on a stock exchange to «make public, without delay, any fact or decision within their knowledge which, if it were made public, would be likely to have a significant effect on the price of the shares on the exchange». The Belgian Government indicates that that provision has since been incorporated into Royal Decree No. 1421 of 3 July 1996 on ad hoc reporting obligations of issuers whose financial instruments are listed on the primary market and the new market of a stock exchange.

The Belgian Government adds that certain specific attributes of holding companies led the legislature to define inside information more precisely where those companies are concerned, but points out that that definition merely renders explicit, in the case of a particular category of companies, the general definition.

Alternatively, it submits that, should the definition of inside information for holding companies be held to be different from that applicable to other companies, that would not detract from the general scope of application of Article 182 of the Law on Financial Transactions and Financial Markets of 1990, since that provision prohibits use of any inside information for carrying out transactions relating to transferable securities or financial instruments.

In the further alternative, the Belgian Government submits that, if the combined provisions of the second paragraph of Article 181 and Article 182 of the Law on Financial Transactions and Financial Markets of 1990 were to be held to create an exception to a provision more stringent than those laid down by the Directive 89/592/EEC on insider dealing, that exception is justified. Indeed, the directive itself takes account of certain specific situations and certain categories of participants in the financial markets so as to remove them from its ambit in order to avoid prohibiting perfectly

routine transactions. In this connection, the Belgian Government refers to the 11th and 12th recitals in the Preamble to the Directive 89/592/EEC on insider dealing and to Article 2(4) of that Directive. It submits that, in the absence of provisions such as those contained in the second paragraph of Article 181 of the Law on Financial Transactions and Financial Markets of 1990, holding companies would be unable to manage their shareholdings. The Netherlands Government shares that view. Both governments consider that holding companies are in a special position because, by virtue of their legal or de facto control over their subsidiaries, they necessarily possess confidential information. Thus, if all such information were to be regarded as inside information, such companies would be unable to conduct their business.

It must be borne in mind at the outset that, although the Court may not, under Article 177 of the Treaty establishing the European Community, rule upon the compatibility of a provision of domestic law with Community law or interpret domestic legislation or regulations, it may nevertheless provide the national court with an interpretation of Community law on all such points as may enable that court to determine the issue of compatibility for the purposes of the case before it (see, for example, joined cases 209/84 to 213/84, Asjes and Others, para. 12, and joined cases C-304/94, C-330/94, C-342/94 and C-224/95, Tombesi and Others, para. 36).

Under Article 2(1) of the Directive 89/592/EEC on insider dealing, the Member States must prohibit any person who, by virtue of his duties, profession or holding in the capital of an issuer, possesses inside information from taking advantage of that information with full knowledge of the facts by acquiring or disposing of, for his own account or for the account of a third party, either directly or indirectly, transferable securities of the issuer or issuers to which that information relates.

Article 6 of the Directive 89/592/EEC on insider dealing permits the Member States to adopt provisions more stringent than those laid down by the directive, provided that such provisions are applied generally.

The Belgian Government accepts that, with regard to the prohibition contained in Article 2(1) of the Directive 89/592/EEC on insider dealing, its national legislature availed itself of the possibility of laying down more stringent provisions by not adopting the condition of «taking advantage» of inside information «with full knowledge of the facts». Article 182(1) of the Law on Financial Transactions and Financial Markets of 1990 in fact prohibits persons to whom it applies and who are in possession of information which they know, or ought reasonably to know, is inside information from acquiring or disposing of transferable securities whose market price is likely to be significantly affected by that information.

Furthermore, the Belgian legislature introduced into the definition of inside information, set out in Article 181 of the Law on Financial Transactions and Financial Markets of 1990, additional elements in relation to the definition of inside information in Article 1 of the Directive 89/592/EEC on insider dealing, which covers information not in the public domain, of a precise nature and relating to one or more issuers of transferable securities or to one or several transferable securities, which, if it were made public, would be likely «to have a significant effect on the price of the transferable security or securities in question». However, it is clear that the additional elements in Article 181 of the Law on Financial Transactions and Financial Markets of 1990 concern only information held by a particular category of participants in the financial markets, namely holding companies, and do not concern, in general, a specific kind of information that might have an influence on the price

of transferable securities or other financial instruments, regardless of the status or position of the natural or legal person possessing that information.

Such a provision can therefore bring about a regime specific to a particular category of participants in the financial markets, contrary to Article 6 of the Directive 89/592/EEC on insider dealing, unless the additional elements merely clarify the general definition of inside information for that category of participants without in any way altering the scope of that definition.

It is for the national court to determine whether or not the additional elements included by the national legislature in Article 181 of the Law on Financial Transactions and Financial Markets of 1990 with regard to information in the possession of holding companies, read in conjunction with all the provisions of national law determining the application of that provision, result in making the information regarded as inside information in the case of holding companies more restricted than the information regarded as inside information for the purposes of the general definition contained in Article 181. In so doing, the national court will thus be able to determine whether or not holding companies and persons having access to information possessed by them are more favourably treated than other participants in the financial market in so far as concerns the prohibition on using inside information as defined by the Directive 89/592/EEC on insider dealing and, in particular, in so far as concerns the provisions of the Law on Financial Transactions and Financial Markets of 1990 that are more stringent than those set out in the directive.

Consideration by the Court of Justice: The Third Question. In the event that the existence of provisions of national law more stringent than those laid down by the Directive 89/592/EEC on insider dealing is incompatible with Article 6 of that Directive, by reason of the fact that they are not of general application, the national court asks essentially whether those more stringent provisions are to be regarded as not forming part of the national legislation or whether they must be applied to all participants in the financial markets, including those otherwise exempt from them under that national legislation.

Suffice it to observe in this connection that, if the provisions of the legislation of a Member State that are more stringent than those laid down by the Directive 89/592/EEC on insider dealing are incompatible with Article 6 of that Directive, they are contrary to Community law and cannot therefore be applied to any participant in the financial markets.

The answer to the third question must therefore be that, if provisions of national law run counter to Article 6 of the Directive 89/592/EEC on insider dealing, by reason of the fact that certain natural or legal persons are specifically exempted from a more stringent prohibition of use of inside information than that laid down by the directive, the national court must disapply those more stringent provisions with regard to all persons to whom they might otherwise apply.

Rulings. The Court of Justice in answer to the questions referred to it rules:

1. Article 6 of the Directive 89/592/EEC on insider dealing does not preclude the application of legislative provisions of a Member State which, as regards the prohibition of use of inside information, are more stringent than those laid down by the directive, provided that the scope of the definition of inside information used for applying that legislation is the same for all natural or legal persons subject to the legislation.

2. If provisions of national law run counter to Article 6 of the Directive 89/592/EEC on insider dealing, by reason of the fact that

certain natural or legal persons are specifically exempted from a more stringent prohibition of use of inside information than that laid down by the directive, the national court must disapply those more stringent provisions with regard to all persons to whom they might otherwise apply.

Judgment of the Court of Justice of the European Union of 22 November 2005 - Case C-384/02 - Knud Gr0ngaard and Allan Bang

Reference for a Preliminary Ruling. The reference for a preliminary ruling concerns the interpretation of Article 3(a) of the Directive 89/592/EEC on insider dealing.

The reference has been made in the course of criminal proceedings brought against Mr Gr0ngaard and Mr Bang for offences under the Law on Dealings in Transferable Securities, which transposed the Directive 89/592/EEC on insider dealing into Danish law.

Dispute in the Main Proceedings and the Questions Referred for a Preliminary Ruling. Mr Bang is the General Secretary of Finansforbundet, the professional trade union of employees in the financial sector. Finansforbundet has approximately 50 000 members.

Mr Gr0ngaard was a member, elected by the staff, of the board of directors of the company RealDanmark, a major financial institution quoted on the stock exchange and having almost 7 000 employees. He had also been appointed by Finansforbundet as a member of the RealDanmark Group's Liaison Committee (hereinafter «the Liaison Committee»). That committee had been set up under an agreement between Finansforbundet and RealDanmark. Mr Gr0ngaard represented the trade union on that committee. Finally, Mr Gr0ngaard was secretary of Kapitalkreds, one of the 11 sections of Finansforbundet, which, with about 6 500 members, brought together more than 90% of RealDanmark's staff.

Following an extraordinary meeting of RealDanmark's board of directors, Mr Gr0ngaard, on 23 August 2000, disclosed to Mr Bang information relating to a plan to enter into merger negotiations with Danske Bank, another important financial institution in Denmark.

Between 28 August and 4 September 2000, Mr Bang consulted his two deputy General Secretaries, Mrs Madsen and Mrs Nielsen, as well as Mr Christensen, one of his colleagues in Finansforbun-det's secretariat, disclosing to them the same information as that which he had received from Mr Gr0ngaard. On 31 August 2000, Mr Christensen bought shares in RealDanmark for the sum of approximately EUR 48 000.

On 18 September 2000, Mr Gr0ngaard attended a meeting of RealDanmark's board, in the course of which the details of the merger were discussed. On 22 September 2000, he attended a special meeting of the Liaison Committee, in the course of which the details of the merger were also discussed. He again approached Mr Bang, on 26 September 2000, with the aim of helping the staff to deal with the consequences of the merger. They discussed, in particular, the timetable envisaged for the merger as well as the expected rise in the market price of RealDanmark's shares, understood to be between 60% and 70%.

On 27 and 28 September 2000 respectively, Mr Bang disclosed some information to Mr Larsen, the head of Finansforbundefs secretariat, and to his colleague Mr Christensen, concerning, in particular, the date envisaged for the announcement of the merger and the anticipated conversion rate. On 29 September 2000, Mr Christensen bought additional shares in RealDanmark for approximately EUR 214 000.

On 2 October 2000, the merger between RealDanmark and Danske Bank was made public and the market price of Real-Danmark's shares rose by some 65%. Mr Christensen sold his shares in RealDanmark on 2 and 3 October 2000, realising a total profit of about EUR 180 000. He was subsequently sentenced to six months' imprisonment for insider dealing, contrary to Paragraph 35(1) of the Law on Dealings in Transferable Securities.

Mr Gr0ngaard and Mr Bang are being prosecuted before the Copenhagen District Court (K0benhavns Byret) for having disclosed inside information, contrary to Paragraph 36(1) of that Law.

In the case before it, the Copenhagen District Court (K0benhavns Byret) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:10

1. Does Article 3(a) of the Directive 89/592/EEC on insider dealing preclude a person from disclosing inside information in the case where that person received the inside information in his capacity as an employee-elected member of the board of the undertaking to which the inside information relates and that information is disclosed to the general secretary of the trade union which organises the employees who elected the person concerned as a board member?

2. Does Article 3(a) of the Directive 89/592/EEC on insider dealing preclude a person from disclosing inside information in the case where that person received the inside information in his capacity as a member of the undertaking's corporate liaison committee and that information is disclosed to the general secretary of the trade union which appointed the person concerned to be a member of the corporate liaison committee?

3. Does Article 3(a) of the Directive 89/592/EEC on insider dealing preclude the general secretary of a trade union from disclosing inside information in the case where that general secretary received the inside information under the circumstances outlined in Question 1 and the information is passed on to:

a) the general secretary's two deputies;

b) the senior administrative manager of the union's secretariat; and

c) colleagues of the general secretary within the union's secretariat?

4. Does Article 3(a) of the Directive 89/592/EEC on insider dealing preclude the general secretary of a trade union from disclosing inside information in the case where that general secretary received the inside information under the circumstances outlined in Question 2 and the information is passed on to:

a) the general secretary's two deputies;

b) the senior administrative manager of the union's secretariat; and

c) colleagues of the general secretary within the union's secretariat?

5. What bearing on the answers to Questions 1 to 4 has the fact that the inside information which is disclosed is:

a) information on the commencement of merger negotiations between two companies quoted on the stock exchange;

b) information on the date of merger of two companies quoted on the stock exchange; or

c) information on the level of the rise in the value of shares in a company quoted on the stock exchange which is anticipated by reason of the fact that the company is to merge with another quoted company?

Consideration11 by the Court of Justice: The First and the Second Questions. By its first two questions, which it is appropriate to consider together, the referring court is asking in essence whether Article 3(a) of the Directive 89/592/EEC on insider dealing pre-

10 Reference for a preliminary ruling by the Copenhagen District Court (K0ben-havns Byret) (Denmark) by order of that Court of 14 August 2002 in the case of Anklagemyndigheden against Knud Gr0ngaard and Allan Bang (Case C-384/02).

11 See also: Opinion of Advocate General Poiares Maduro delivered on 25 May 2004 - Case C-384/02 - Anklagemyndigheden versus Knud Gr0ngaard and Allan Bang.

eludes a person, who receives inside information in his capacity as the employees' representative on a company's board of directors or in his capacity as a member of the liaison committee of a group of undertakings, from disclosing such information to the general secretary of the professional organisation which organises those employees and which appointed that person as a member of the liaison committee.

In that regard, it is appropriate first of all to note that the rights and duties and the functioning of the administrative, managerial and supervisory bodies of capital companies, as well as the rights and duties and role of employees' representatives on those bodies are, in their essentials, regulated by the Member States' legal orders.

The same applies with regard to the rights and duties and functioning of the liaison committee.

It follows that, on the question whether the disclosure of inside information by such a person to the general secretary of that professional organisation comes within the normal exercise of his duties, the reply depends, to a large extent, on the rules governing those duties in the national legal system in question.

In view of the foregoing, the reply to the first and second questions must be that Article 3(a) of the Directive 89/592/EEC on insider dealing precludes a person, who receives inside information in his capacity as an employees' representative on a company's board of directors or in his capacity as a member of the liaison committee of a group of undertakings, from disclosing such information to the general secretary of the professional organisation which organises those employees and which appointed that person as a member of the liaison committee, unless:

there is a close link between the disclosure and the exercise of his employment, profession or duties, and

that disclosure is strictly necessary for the exercise of that employment, profession or duties.

As part of its examination, the national court must, in the light of the applicable national rules, take particular account of:

the fact that that exception to the prohibition of disclosure of inside information must be interpreted strictly;

the fact that each additional disclosure is liable to increase the risk of that information being exploited for a purpose contrary to the Directive 89/592/EEC on insider dealing, and the sensitivity of the inside information.

Consideration by the Court of Justice: The Third and Fourth Questions. By its third and fourth questions, which it is appropriate to consider together, the referring court is in essence asking the Court whether and under what conditions Article 3(a) of the Directive 89/592/EEC on insider dealing allows the general secretary of a professional organisation, who receives inside information in the circumstances set out in the first and second questions, to disclose that information to his colleagues.

It should be pointed out in this regard that the activities of a professional organisation, such as that in issue in the main proceedings, and the role of its general secretary are subject, in their essentials, in the same way as the administrative bodies and liaison committee which form the subject-matter of the first two questions, to the national legal system in question.

It follows that the reply to the question whether the general secretary of such a professional organisation may disclose inside information to third parties in the course of his duties depends to a large extent on the applicable national law.

It should be recalled that even if such a disclosure is allowed by the applicable national legal order, it must also, in order to come

within the exception under Article 3(a) of the Directive 89/592/EEC on insider dealing, be made under the conditions specified above.

In that context, it must also be observed that, under Articles 2 and 3(a) of the Directive 89/592/EEC on insider dealing, apart from the persons who possess inside information by virtue of their membership of administrative, managerial or supervisory bodies or by virtue of their holding in the capital of the issuing company, the prohibition of disclosure of inside information applies only to persons who possess such information by virtue of the exercise of their employment, profession or duties.

In view of the foregoing, the reply to the third and fourth questions must be that Article 3(a) of the Directive 89/592/EEC on insider dealing precludes disclosure of inside information by the general secretary of a professional organisation to colleagues, such as those referred to in those questions, except under the conditions set out in the reply to the first and second questions. As part of its examination, the national court must, in the light of the applicable national rules, take particular account of the criteria also set out in that reply.

Consideration by the Court of Justice: The Fifth Question. Having regard to the replies given to the first four questions, there is no need to reply to the fifth question.

Rulings. The Court of Justice in answer to the questions referred to it rules: Article 3(a) of the Directive 89/592/EEC on insider dealing precludes a person, who receives inside information in his capacity as an employees' representative on a company's board of directors or in his capacity as a member of the liaison committee of a group of undertakings, from disclosing such information to the general secretary of the professional organisation which organises those employees and which appointed that person as a member of the liaison committee, unless:

- there is a close link between the disclosure and the exercise of his employment, profession or duties, and

- that disclosure is strictly necessary for the exercise of that employment, profession or duties.

As part of its examination, the national court must, in the light of the applicable national rules, take particular account of:

- the fact that that exception to the prohibition of disclosure of inside information must be interpreted strictly,

- the fact that each additional disclosure is liable to increase the risk of that information being exploited for a purpose contrary to the Directive 89/592/EEC on insider dealing, and

- the sensitivity of the inside information.

1. Article 3(a) of the Directive 89/592/EEC on insider dealing precludes disclosure of inside information by the general secretary of a professional organisation to colleagues, such as those referred to in the third and fourth questions, except under the conditions set out in the reply to the first and second questions.

As part of its examination, the national court must, in the light of the applicable national rules, take particular account of the criteria also set out in that reply.

Judgment of the Court of Justice of the European Communities of 10 May 2007 - Case C-391/04 - Charilaos Georgakis

Reference for a Preliminary Ruling. The reference for a preliminary ruling concerns the interpretation of Articles 1 to 4 of the Directive 89/592/EEC on insider dealing.

The reference has been made in the context of proceedings between Greek Minister for Economic Affairs (Ipourgos Ikonomikon) and Greek Tax authority of Amphissa (Proistamenos DOI Amfissas), on the one hand, and Mr Georgakis, on the other, concerning the taking advantage by him of inside information by reason of his participation, with the other principal shareholders and members

of the board of directors of a company, in stock-market transactions agreed on in advance between them to increase artificially the price of transferable securities in that company.

Dispute in the Main Proceedings and the Question Referred for a Preliminary Ruling. Following the stock-market crisis of November 1996, the Department of Capital Markets and Stock Exchanges for Transferable Securities of the Ministry of Economic Affairs carried out investigations into transactions relating to the shares of the companies Parnassos and Atemke. The persons implicated by significant evidence as having breached the legislation relating to the capital market were requested to submit written statements.

According to the information available to the Athens Stock Exchange, in August 1996, Mr Georgakis and certain members of his family (hereinafter «the Georgakis group») were the main shareholders of Parnassos. At the same time, Parnassos and its subsidiary, Syrios AVEE, held the majority of shares in Atemke. In each case, the shares were registered shares. Mr Georgakis and most of the members of the Georgakis group were members of the board of directors of Parnassos and of Atemke, companies in which they performed managerial functions.

The members of the Georgakis group took the decision, on the recommendation of their financial advisers, to support the price of Parnassos shares at a time when their value was coming under downward pressure. Consequently, they undertook various sale, purchase and buy-back transactions in Parnassos and Atemke shares which were carried out between themselves, Parnassos and a foreign institutional investor.

The Capital Markets Commission decided that Mr Georgakis had thereby effected transactions in transferable securities using inside information and fined him GRD 70 000 000. Its decision was confirmed by the Administrative Court of First Instance in Livadia (Trimeles Diikitiko Protodikio Livadia).

The transactions at issue which Mr Georgakis is accused of effecting were, in particular, the assignment of 92 000 Parnassos and 11 100 Atemke shares and acting as purchaser in 1 of 26 contentious transactions relating to Parnassos shares and acting as vendor of some of the 112 500 Atemke shares bought from certain members of the group by one of its members. At the time of these transactions, no shares were released onto the open market and all were sold and bought primarily between the members of the Georgakis group. Those transactions were, it is alleged, agreed on in advance since the members effected the sales and purchases following their decision to support Parnassos shares. They were allegedly designed to increase artificially the volume of trading in Parnassos shares in order to give a misleading impression of their value, unconnected with the value they would have achieved had it not been for those fictitious transactions.

Mr Georgakis successfully appealed against the judgment at first instance to the Administrative Appeal Court in Piraeus (Diikitiko Efetio Piraios).

Greek Minister for Economic Affairs (Ipourgos Ikonomikon) and the Greek Tax authority of Amphissa (Proistamenos DOI Amfissas) appealed on a point of law to the Council of State (Simvoulio tis Epikratias) asking for that judgment to be quashed.

Against this background, the Council of State (Simvoulio tis Epikratias) decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling12 - Where stock-

12 Reference for a preliminary ruling by the Council of State (Simvoulio tis Epikratias) (Greece) by order of that court of 6 July 2004 in the case of Minister for Economic Affairs (Ipourgos Ikonomikon) (Greece) and Tax authority of

market transactions agreed on in advance which result in the increase or artificial inflation of the price of the securities transferred are carried out between persons or groups of persons having one of the characteristics set out in Article 2(1) of the Directive 89/592/EEC on insider dealing are the persons carrying out those transactions to be regarded as persons possessing inside information within the meaning of Articles 1 and 2 of that Directive, so that their actions fall within the prohibition, laid down by Articles 2, 3 and 4 of the directive, on taking advantage of inside information?

Consideration13 by the Court of Justice: By its question, the national court asks essentially whether Articles 1 and 2 of the Directive 89/592/EEC on insider dealing are to be interpreted as meaning that, when the main shareholders and members of the board of directors of a company agree to effect between themselves stock-market transactions in the transferable securities of that company in order to increase the price artificially, they possess inside information of which they take advantage with full knowledge of the facts when they carry out the transactions.

In order to determine whether, on the particular facts of the case in the main proceedings, a group of persons acts on the basis of inside information which its members possess, it is necessary, at the outset, to consider whether the decision to effect the stockmarket transactions was taken on the basis of information disclosed directly or indirectly by a person belonging to one of the categories referred to in Article 2 of the Directive 89/592/EEC on insider dealing and possessing inside information within the meaning of Article 1(1) of that Directive.

It is clear from the order for reference that the decision taken by the Georgakis group to act on the secondary market for transferable securities in a concerted way in order to support the price of Parnassos shares, of which company they were the main shareholders and members of the board of directors, was taken on the recommendation of their financial advisers.

It follows from the wording of Article 1(1) of the Directive 89/592/EEC on insider dealing that inside information, in order to be considered as such, must fulfil a number of conditions, namely, it must not have been made public, and must be of a precise nature, relate to an issuer of transferable securities or to transferable securities as such, and be likely, if made public, to have a significant effect on the price of those securities.

Consequently, a mere recommendation to take certain steps, made solely on the basis of an expert analysis of the subject, cannot be considered as meeting such conditions.

Article 2(1) of the Directive 89/592/EEC on insider dealing prohibits any person who, by virtue, in particular, of his membership of administrative bodies or by virtue of the exercise of his employment, profession or duties, possesses inside information, relating to one or more transferable securities, from taking advantage of that information by acquiring or disposing of those transferable securities (see case C-384/02, Gr0ngaard and Bang, para. 23).

Article 3 of the Directive 89/592/EEC on insider dealing prohibits those same persons from disclosing that inside information to any third party and recommending or procuring a third party, on the basis of that inside information, to acquire or dispose of transferable securities, whilst Article 4 of that Directive prohibits any other

Amphissa (Proistamenos DOI Amfissas) (Greece) against Charilaos Georgakis (Case C-391/04).

13 See also: Opinion of Advocate General Mengozzi delivered on 26 October 2006 - Case C-391/04 - Minister for Economic Affairs (Ipourgos Ikonomikon) (Greece), Tax authority of Amphissa (Proistamenos DOI Amfissas) (Greece) versus Charilaos Georgakis.

person from taking advantage of inside information disclosed by any person belonging to one of the categories referred to in Article 2(1) of that Directive.

It is clear from the decision making the reference that the financial advisers to the Georgakis group were not in any one of the situations set out in Article 2(1) of the Directive 89/592/EEC on insider dealing and that their recommendation to support Parnas-sos shares when their value was coming under downward pressure was not, moreover, based on information which might have been disclosed by a person in one of those situations.

Consequently, in following the recommendations of their financial advisers, the members of the Georgakis group were not prompted to effect the transactions at issue in the main proceedings on the basis of information fulfilling the conditions laid down in Article 1(1) of the Directive 89/592/EEC on insider dealing. Nor, moreover, did they act on the basis of information or a body of information obtained directly from one of the categories of persons referred to in Article 2 of that Directive or indirectly by way of a third party.

It is necessary to examine, next, whether, by virtue of having participated in the adoption of a decision such as that at issue in the main proceedings, in the circumstances described above, the members of the Georgakis group were in possession of inside information within the meaning of Article 1(1) of the Directive 89/592/EEC on insider dealing.

The decision of the members of the Georgakis group concerning support for Parnassos shares appears to establish a common position within that group as to the transactions to be effected between its members in order to cause the price of the transferable securities of Parnassos to be increased artificially. Knowledge of the existence of such a decision and of its content constitutes, for those who participated in its adoption, inside information within the meaning of Article 1(1) of the Directive 89/592/EEC on insider dealing.

It is information which had not been made public of a precise nature relating to transferable securities, which, if it had been made public, was likely to have a significant effect on the price of Parnassos shares, capable even of leading to its stock-market collapse.

It follows that persons such as the members of the Georgakis group, by virtue of having been the originators of such inside information and of having disclosed it in their capacity as main shareholders of Parnassos and members of its board of directors, fall under the prohibition laid down in Article 2 of the Directive 89/592/EEC on insider dealing on taking advantage of that information with full knowledge of the facts.

It is necessary to consider, finally, whether, by putting into effect a decision such as that adopted within the Georgakis group, namely by effecting the stock-market transactions agreed, the members of such a group took advantage of inside information which was in their possession within the meaning of Article 2 of the Directive 89/592/EEC on insider dealing. It follows from that provision and from recital No. 12 in the Preamble to that Directive that insider dealing involves not only disclosing inside information but also taking advantage of it.

Recitals No. 2-5 in the Preamble to the Directive 89/592/EEC on insider dealing state that it is intended to ensure the proper functioning of the secondary market in transferable securities and to protect investors' confidence, which depends, in particular, on their being placed on an equal footing and protected against the improper use of inside information (case C-384/02, Gr0ngaard and Bang, para. 33).

Consequently, the purpose of the prohibition laid down by Article 2 of the Directive 89/592/EEC on insider dealing is to ensure equality between the contracting parties in stock-market transactions by preventing one of them who possesses inside information and who is, therefore, in an advantageous position vis-à-vis the other investors, from profiting from that information, to the detriment of the other party who is unaware of it.

Thus, where, in a case such as that in the main proceedings, all of the contracting parties have the same information, they are on an equal footing and the information ceases to be inside information for them in the context of the implementation of the decision adopted within the group. Against this background, since none of them is in a position to derive an advantage over the others, the transactions effected between the members of the group on the basis of that information do not constitute taking advantage, with full knowledge of the facts, of inside information within the meaning of Article 2 of the Directive 89/592/EEC on insider dealing.

The Greek and Italian Governments consider, however, that the implementation of a decision such as that in the case in the main proceedings cannot be excluded from the scope of the Directive 89/592/EEC on insider dealing. They contend that, where the prior decision to effect a transaction is accompanied by an attempt to mislead the investing public, jeopardises the operation of the market in transferable securities and is motivated by the intention to derive a certain benefit thereby, then the information to which that decision relates is of decisive importance and taking advantage of it may deal a serious blow to market transparency.

In the present case, whilst it is true that the practices followed in order to bring about an artificial increase in the price of certain transferable securities by means of concerted transactions are liable to provoke a loss of investor confidence in the integrity of financial markets, the fact remains that the scope of the Directive 89/592/EEC on insider dealing - the sole Community measure applicable to the facts in the case in the main proceedings - is limited to taking advantage of inside information by persons who are insiders or the disclosure of that information by those persons to third parties. Consequently, the provisions of that Directive are not applicable to transactions designed to determine artificially, by concerted means, the price of certain transferable securities.

That interpretation is confirmed by recital No. 11 in the Preamble to the Directive 2003/6/EC on market abuse, in which it is stated that, when the directive was adopted, the existing Community legal framework to protect market integrity was incomplete and that in some Member States there was no legislation addressing the issues of price manipulation and the dissemination of misleading information. That interpretation is also confirmed by the specific objective of the directive, which is to prevent and penalise market abuse both when it takes the form of insider dealing and when it takes the form of market manipulation, which is defined

Rulings. The Court of Justice in answer to the question referred to it rules: Articles 1 and 2 of the Directive 89/592/EEC on insider dealing must be interpreted as meaning that, when the main shareholders and members of the board of directors of a company agree to effect between themselves stock-market transactions in the transferable securities of that company in order to support artificially the price of those securities, they are in possession of inside information of which they do not take advantage with full knowledge of the facts when they carry out those transactions.

Judgment of the Court of Justice of the European Union of 23 December 2009 - Case C-45/08 - Spector Photo Group, Chris Van Raemdonck versus the Commission for Banking, Finance and Insurance

Reference for a Preliminary Ruling. The reference for a preliminary ruling concerns the interpretation of Articles 2 and 14 of the Directive 2003/6/EC on market abuse.

The reference was made in the course of proceedings in Belgium between, on the one hand, Spector Photo Group NV (hereinafter «Spector») and one of its managers, Mr Van Raemdonck, and, on the other hand, the Commission for Banking, Finance and Insurance (hereinafter «CBFA»; Commissie voor het Bank-, Financie- en Assurantiewezen), which imposed fines on the former two parties for insider dealing.

Dispute in the Main Proceedings and the Questions Referred for a Preliminary Ruling. Spector is a publicly quoted company governed by Belgian law. As part of its profit-sharing policy it offers a stock option programme to its staff. In the event of those options being exercised, Spector had planned to prioritise the use of the shares in its possession and, if necessary, to buy the balance of required shares on the market. In the course of 2002 Spector thus had to purchase more than 45 000 shares on the market.

On 21 May 2003, as required by the Belgian legislation in force at that time, Spector informed Euronext Brussels of its intention to buy a certain number of its own shares as part of the implementation of its stock option programme.

From 28 May 2003 to 30 August 2003 Spector purchased a total of 27 773 shares. Initially, four successive transactions of 2 000 shares were effected. Then, on 11 and 13 August 2003, Mr Van Raemdonck placed two orders enabling Spector to acquire 19 773 shares at an average price of EUR 9.97, the exercise price of the options at issue being EUR 10.45. Spector subsequently published certain information concerning its results and its commercial policy. The company's share price is stated to have then increased. On 31 December 2003 it was at EUR 12.50.

By decision of 28 November 2006 (hereinafter «the contested decision») the CBFA classed the purchases made on the basis of the orders of 11 and 13 August 2003 as insider dealing, prohibited under Article 25(1) of the initial version of the Law of 2 August 2002. The CBFA imposed fines of EUR 80 000 on Spector and EUR 20 000 on Mr Van Raemdonck. Those parties then brought an action against that decision before the Court of Appeal in Brussel (Hof van beroep te Brussel).

In that dispute, the applicants in the main proceedings raised three sets of arguments, which are at the origin of the reference for a preliminary ruling, concerning the retroactive effect of the newer, more lenient, Law (retroactivity inmitius), the elements which constitute insider dealing, and the proportionality of the sanction imposed for the alleged infringement.

According to the referring court, the applicants in the main proceedings complain primarily that the CBFA disregarded the principle of retroactivity in mitius. They essentially claim that the provisions of Article 25(1) of the amended version of the Law on Supervision of the Financial Sector and Financial Services of 2002 are incompatible with the definition of insider dealing given in Article 2 of the Directive 2003/6/EC on market abuse and are thus inapplicable. Consequently, the incompatibility of those provisions with the Directive 2003/6/EC on market abuse is claimed to have created a legal vacuum, analogous to a more lenient criminal law, preventing the CBFA from applying Article 25(1) of the initial version of the Law on Supervision of the Financial Sector and Financial Services of 2002.

The referring court states that the CBFA applied Article 25(1) of the amended version of the Law on Supervision of the Financial Sector and Financial Services of 2002 even though the incriminating facts preceded the date on which that provision entered into

force, namely 1 January 2004. It considers that it is possible that that provision has amended the definition of insider dealing, making it more repressive. For there to be insider dealing, Article 25(1) no longer requires the use of privileged information but merely possession thereof.

The referring court is uncertain whether the Member States may define the elements which constitute insider dealing more strictly than Article 2 of the Directive 2003/6/EC on market abuse, and also as to the interpretation to be given to the expression use of inside information for the purposes of that provision.

According to the referring court, the applicants in the main proceedings submit, in the alternative, that the elements constituting insider dealing under Article 25(1) of the initial version of the Law on Supervision of the Financial Sector and Financial Services of 2002 are not met. They claim that the CBFA has not established that the share purchases at issue in the main proceedings were made because of the imminent publication of the results of the company concerned.

The referring court is uncertain as to the type of evidence which may enable a finding that inside information has been used within the meaning of Article 2 of the Directive 2003/6/EC on market abuse.

According to the referring court, the applicants in the main proceedings submit that the sanctions imposed are disproportionate to the severity of the infringement. The referring court is uncertain as to the criteria to be used in evaluating the proportionality of sanctions.

In those circumstances, the Court of Appeal in Brussel (Hof van beroep te Brussel) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:14

1. Do the provisions of the Directive 2003/6/EC on market abuse, and especially Article 2 thereof, call for full harmonisation, with the exception of those provisions which explicitly permit the Member States to interpret measures as they wish, or do they, in their entirety, concern a minimum of harmonisation?

2. Should Article 2(1) of the Directive 2003/6/EC on market abuse be interpreted as meaning that the mere fact that a person as referred to in [the first paragraph of] Article 2(1) of that Directive who possesses inside information and acquires or disposes of, or tries to acquire or dispose of, for his own account or for the account of a third party, financial instruments to which that inside information relates, signifies in itself that he makes use of that inside information?

3. If the answer to the second question is in the negative, must it then be assumed that application of Article 2 of the Directive 2003/6/EC on market abuse presupposes that a deliberate decision has been taken to use inside information? If such a decision may also be unwritten, is it then required that the decision to use inside information be evident from circumstances susceptible to no other interpretation, or is it sufficient that those circumstances could be so interpreted?

4. If in the determination of the proportionate nature of an administrative sanction, as referred to in Article 14 of the Directive 2003/6/EC on market abuse, account must be taken of the gains realised, should it be assumed that the publication of information to be designated as inside information has in fact had a significant

14 Reference for a preliminary ruling from the Court of Appeal in Brussel (Hof van beroep te Brussel) (Belgium) lodged on 8 February 2008 - Spector Photo Group NV and Chris Van Raemdonck versus the Commission for Banking, Finance and Insurance (Commissie voor het Bank-, Financie- en Assurantiewezen) (Belgium) (Case C-45/08).

effect on the price of the financial instrument? If so, what minimum level of price movement must have occurred for it to be possible to regard it as significant?

5. Whether or not the price movement after the publication of information must be significant, what period should be taken into account after the publication of the information for the determination of the scale of the price movement, and what date should be taken as the basis for gauging the financial advantage gained in the determination of the appropriate sanction?

6. In the light of the determination of the proportionate nature of the sanction, should Article 14 of the Directive 2003/6/EC on market abuse be interpreted as meaning that, if a Member State has introduced the option of a criminal sanction, combined with an administrative sanction, account must be taken of the option and level of a criminal financial penalty in the consideration of its proportionality?

Consideration15 by the Court of Justice: The Second and Third Questions. By its second and third questions, which need to be examined together and prior to the others, the referring court requests the Court of Justice to interpret the expression use of inside information in Article 2(1) of the Directive 2003/6/EC on market abuse. That provision provides that the Member States are to prohibit any person referred to in the second subparagraph thereof (a primary insider) who «possesses inside information from using that information by acquiring or disposing of, ... for his own account or for the account of a third party, either directly or indirectly, the financial instruments to which that information relates» or from trying to enter into such a transaction on the market. More precisely, the referring court seeks to determine whether it is sufficient, for a transaction to be classed as prohibited insider dealing, that a primary insider in possession of inside information trades on the market in financial instruments to which that information relates or whether it is necessary, in addition, to establish that that person has used that information with full knowledge.

Article 2(1) of the Directive 2003/6/EC on market abuse does not stipulate that prohibited transactions must be carried out with full knowledge of the facts, but merely prohibits primary insiders from using inside information when entering into market transactions. That article defines the constituent elements of such prohibited transactions by referring expressly to two such elements, namely, the persons likely to fall within its scope and the material actions which constitute that transaction.

By contrast, that provision does not expressly set out the subjective conditions in relation to the intention behind those material actions. Article 2(1) of the Directive 2003/6/EC on market abuse does not state whether the primary insider must have been driven by a speculative intention, must have had a fraudulent intention or must have acted either deliberately or negligently. That article does not expressly state whether it is necessary to establish that the inside information was decisive in the decision to enter into the market transaction at issue, or whether the primary insider had to be aware that the information in his possession was inside information.

In that regard, it should be noted that, in drafting the Directive 2003/6/EC on market abuse, the Community legislature sought to fill in some of the gaps identified in the Directive 89/592/EEC on insider dealing. Article 2(1) of the Directive 89/592/EEC on insider

15 See also: Opinion of Advocate General Kokott delivered on 10 September 2009 - Case C-45/08 - Spector Photo Group NV, Chris Van Raemdonck versus the Commission for Banking, Finance and Insurance (Commissie voor het Bank, Financie- en Assurantiewezen) (Belgium).

dealing sought to prohibit any person who ... possesses inside information from entering into a market transaction in relation to the transferable securities concerned by taking advantage of that information with full knowledge of the facts. The transposition of that provision into national law gave rise to variances in the interpretation by the Member States of the expression with full knowledge of the facts, which in certain national legal systems was assimilated to a requirement of a mental element.

In that regard, the Proposal for a Directive on market abuse (2001/0118 (COD)), submitted by the European Commission on 30 May 2001, was based on the wording of Article 2(1) of the Directive 89/592/EEC on insider dealing while removing the expression with full knowledge of the facts, on the ground that «by nature [primary insiders] may have access to inside information on a daily basis and are aware of the confidential nature of the information that they receive».

The above shows that Article 2(1) of the Directive 2003/6/EC on market abuse defines insider dealing objectively without the intention behind such dealing being referred to explicitly in its definition. This was done with a view to achieving uniform harmonisation of the law of the Member States.

The fact that Article 2(1) of the Directive 2003/6/EC on market abuse does not expressly provide for a mental element can be explained, first, by the specific nature of insider dealing, which enables a presumption of that mental element once the constituent elements referred to in that provision are present. To begin with, the relationship of confidence which links the primary insiders referred to in Article 2(1)(a) to (c) to the issuer of the financial instruments to which the inside information relates implies, on their part, a specific responsibility in that regard. Next, entering into a market transaction is necessarily the result of a series of decisions forming part of a complex context which, in principle, makes it possible to exclude the possibility that the author of that transaction could have acted without being aware of his actions. Finally, where such a market transaction is entered into while the author of that transaction is in possession of inside information, that information must, in principle, be deemed to have played a role in his decision-making.

The fact that Article 2(1) of the Directive 2003/6/EC on market abuse does not expressly provide for a mental element among the constituent elements of insider dealing can be explained, second, by the purpose of the Directive 2003/6/EC on market abuse, which, as is pointed out, among others, in the second and twelfth recitals in the Preamble thereto, is to ensure the integrity of Community financial markets and to enhance investor confidence in those markets. The Community legislature opted for a preventative mechanism and for administrative sanctions for insider dealing, the effectiveness of which would be weakened if made subject to a systematic analysis of the existence of a mental element. Only if the prohibition on insider dealing allows infringements to be effectively sanctioned does it prove to be powerful and encourage compliance with the rules by all market actors on a lasting basis. The effective implementation of the prohibition on market transactions is thus based on a simple structure in which subjective grounds of defence are limited, not only to enable sanctions to be imposed but also to prevent effectively infringements of that prohibition.

Once the constituent elements of insider dealing laid down in Article 2(1) of v are satisfied, it is thus possible to assume an intention on the part of the author of that transaction.

Such a presumption does not, however, infringe fundamental rights and, in particular, the principle of the presumption of inno-

cence laid down, among others, in Article 6(2) of the Convention for the Protection of Human Rights and Fundamental Freedoms, signed in Rome on 4 November 1950.

It should be noted in that regard that, according to settled case-law, fundamental rights form an integral part of the general principles of law whose observance the Court ensures (joined cases C-402/05 P and C-415/05 P, Kadi and Al Barakaat International Foundation v Council and the Commission, para. 283).

It is also apparent from the Court's case-law that respect for human rights is a condition of the lawfulness of Community acts and that measures incompatible with respect for human rights are not acceptable in the Community (joined cases C-402/05 P and C-415/05 P, Kadi and Al Barakaat International Foundation v Council and the Commission, para. 284).

It is true that Article 14(1) of the Directive 2003/6/EC on market abuse does not oblige the Member States to provide for criminal sanctions against authors of insider dealing but merely states that those States are required to ensure that «the appropriate administrative measures can be taken or administrative sanctions be imposed against the persons responsible where the provisions adopted in the implementation of [that d]irective have not been complied with», the Member States being required, in addition, to ensure that those measures are effective, proportionate and dissuasive.

According to the case-law of the European Court of Human Rights, presumptions of fact or of law operate in every legal system and the Convention for the Protection of Human Rights and Fundamental Freedoms clearly does not prohibit such presumptions in principle. It does, however, require the Contracting States to remain within certain limits in this respect as regards criminal law. Thus, the principle of the presumption of innocence, laid down in Article 6(2) of the Convention for the Protection of Human Rights and Fundamental Freedoms, does not regard presumptions of fact or of law provided for in the criminal law with indifference. It requires States to confine them within reasonable limits which take into account the importance of what is at stake and maintain the rights of the defence (see judgment of 7 October 1988 - Salabiaku v France, § 28, and judgment of 25 September 1992, Pham Hoang versus France, § 33).

This Court considers that the principle of the presumption of innocence does not preclude the presumption in Article 2(1) of the Directive 2003/6/EC on market abuse that the intention of the author of insider dealing can be inferred implicitly from the constituent material elements of that infringement, provided that that presumption is open to rebuttal and the rights of the defence are guaranteed.

The establishment of an effective and uniform system to prevent and sanction insider dealing with the legitimate aim of protecting the integrity of financial markets has thus led the Community legislature to adopt an objective definition of the constituent elements of prohibited insider dealing. The fact that Article 2(1) of the Directive 2003/6/EC on market abuse does not expressly provide for a mental element does not, however, mean that that provision needs to be interpreted in such a way that any primary insider in possession of inside information who enters into a market transaction, automatically falls within the prohibition on insider dealing.

As pointed out by the Italian and United Kingdom Governments, such an extensive interpretation of Article 2(1) of the Directive 2003/6/EC on market abuse would entail the risk of extending the scope of that prohibition beyond what is appropriate and necessary to attain the goals pursued by that Directive. Such an interpretation could, in practice, lead to the prohibition of certain market transactions which do not necessarily infringe the interests pro-

tected by that Directive. It is therefore necessary to distinguish uses of inside information which are capable of infringing those interests from those which are not.

To that end, reference needs to be made to the purpose of the Directive 2003/6/EC on market abuse. As is apparent from its title, that Directive seeks to tackle market abuse. The second and twelfth recitals in the Preamble thereto state that, following the example of the Directive 89/592/EEC on insider dealing, it prohibits insider dealing with the aim of protecting the integrity of financial markets and enhancing investor confidence, a confidence which depends, among others, on investors being placed on an equal footing and protected against the improper use of inside information (see, by analogy, case C-384/02, Gr0ngaard and Bang, para. 22 and 33).

Thus, the purpose of the prohibition laid down by Article 2(1) of the Directive 2003/6/EC on market abuse is to ensure equality between the contracting parties in stock-market transactions by preventing one of them who possesses inside information and who is, therefore, in an advantageous position vis-à-vis other investors, from profiting from that information, to the detriment of those who are unaware of it (see, by analogy, case C-391/04, Georgakis, para. 38).

In its explanatory memorandum accompanying the proposal which led to the adoption of the Directive 2003/6/EC on market abuse, the European Commission thus stated that «market abuse may arise in circumstances where investors have been unreasonably disadvantaged, directly or indirectly, by others who ... have used information which is not publicly available to their own advantage or the advantage of others ... This type of conduct can create a misleading appearance of trading in financial instruments and undermine the general principle that all investors must be placed on an equal footing . in terms of access to information. Insiders are in possession of confidential information. Trades based on such information lead to unjustified economic advantages at the expense of outsiders». Thus, the proposal for a directive was based on the will to prohibit insiders from drawing an advantage from inside information by entering into market transactions to the detriment of the other actors on the market who do not have access to such information.

Consequently, there is a close link between the prohibition on insider dealing and the concept of inside information, the latter being defined by Article 1 of the Directive 2003/6/EC on market abuse as information of a precise nature which has not been made public, relating to issuers of financial instruments or to financial instruments and which, «if it were made public, would be likely to have a significant effect on the prices of [the] financial instruments [concerned] or on the price of related derivative financial instruments».

In order to strengthen legal certainty for market participants, the Directive 2003/124/EC implementing the Directive 2003/6/EC specified the definition of two key elements of inside information, namely the precise nature of that information and the extent of its potential impact on prices. Article 1(1) of that Directive thus provides that information «[is to] be deemed to be of a precise nature if it indicates a set of circumstances which exists or may reasonably be expected to come into existence or an event which has occurred or may reasonably be expected to do so and if it is specific enough to enable a conclusion to be drawn as to the possible effect of that set of circumstances or event on the prices of financial instruments». Article 1(2) of that Directive defines information likely to have a significant effect on the price of financial instruments as

information which «a reasonable investor would be likely to use as part of the basis of his investment decisions».

Owing to its non-public and precise nature and its ability to influence the prices of financial instruments significantly, inside information grants the insider in possession of such information an advantage in relation to all the other actors on the market who are unaware of it. It enables that insider, when he acts in accordance with that information in entering into a transaction on the market, to expect to derive an economic advantage from it without exposing himself to the same risks as the other investors on the market. The essential characteristic of insider dealing thus consists in an unfair advantage being obtained from information to the detriment of third parties who are unaware of it and, consequently, the undermining of the integrity of financial markets and investor confidence.

Consequently, the prohibition on insider dealing applies where a primary insider who is in possession of inside information takes unfair advantage of the benefit gained from that information by entering into a market transaction in accordance with that information.

It follows that the fact that a primary insider who holds inside information trades on the market in financial instruments to which that information relates implies that that person used that information within the meaning of Article 2(1) of the Directive 2003/6/EC on market abuse, but without prejudice to the rights of the defence and, in particular, the right to be able to rebut that presumption.

However, in order not to extend the scope of the prohibition laid down in Article 2(1) of the Directive 2003/6/EC on market abuse beyond what is appropriate and necessary to attain the goals pursued by that Directive, certain situations may require a thorough examination of the factual circumstances enabling it to be ensured that the use of the inside information is actually unfair so as to be prohibited by the directive in the name of the integrity of financial markets and investor confidence.

In should be noted, in that regard, that the Preamble to the Directive 2003/6/EC on market abuse provides several examples of situations in which the fact that a primary insider in possession of inside information enters into a transaction on the market should not in itself constitute use of inside information for the purposes of Article 2(1) of that Directive.

Thus, recital No. 18 in the Preamble to the Directive 2003/6/EC on market abuse states that use of inside information «can consist in the acquisition or disposal of financial instruments by a person who knows, or ought to have known, that the information possessed is inside information». That hypothesis is expressly provided for in Article 4 of that Directive, which extends the prohibition on insider dealing to persons who know, or ought to have known, that the information in their possession is inside information. None the less, the automatic application of those criteria to certain professionals in the financial markets, who are required to hold inside information relating to transactions carried out on the market by third parties, risks leading to a situation in which such persons are prohibited from carrying out their activity, an activity which is both legitimate and useful for the efficient functioning of the financial markets. The 18th recital in the Preamble to that Directive states, in that regard, that the assessment of what a reasonable person knows or should have known in the circumstances is to be carried out by the competent authorities.

In addition, that recital states that the mere fact that market-makers, bodies authorised to act as counterparties, or persons authorised to execute orders on behalf of third parties with inside

information confine themselves to entering into market transactions legitimately and dutifully should not in itself be deemed to constitute use of such inside information.

Recital No. 29 in the Preamble to the Directive 2003/6/EC on market abuse states that having access to inside information relating to another company and using it in the context of a public takeover bid or a merger proposal «should not in itself be deemed to constitute insider dealing». The operation whereby an undertaking, after obtaining inside information concerning a specific company, subsequently launches a public take-over bid for the capital of that company at a rate higher than the market rate cannot, in principle, be regarded as prohibited insider dealing since it does not infringe the interests protected by that Directive.

Recital No. 30 in the Preamble to the Directive 2003/6/EC on market abuse states that, since the carrying out of a market transaction necessarily involves a prior decision on the part of its author, the carrying out of that transaction 'should not be deemed in itself to constitute the use of inside information'. If that were not the case, Article 2(1) of that Directive could, among others, lead to a situation in which a person who decided to launch a public takeover bid would be prohibited from executing that decision since it would constitute inside information. Such a result would not only go beyond what may be regarded as appropriate and necessary to achieve the goals of that Directive, but could even adversely affect the efficient functioning of the financial markets by preventing public take-over bids.

It follows from the above that the question whether a primary insider in possession of inside information uses that information within the meaning of Article 2(1) of the Directive 2003/6/EC on market abuse must be determined in the light of the purpose of that Directive, which is to protect the integrity of the financial markets and to enhance investor confidence. That confidence is based, in particular, on the assurance that they will be placed on an equal footing and protected from the misuse of inside information. Only usage which goes against that purpose constitutes prohibited insider dealing.

Therefore, the answer to the second and third questions must be that, on a proper interpretation of Article 2(1) of the Directive 2003/6/EC on market abuse, the fact that a person as referred to in the second subparagraph of that provision, in possession of inside information, acquires or disposes of, or tries to acquire or dispose of, for his own account or for the account of a third party, either directly or indirectly, the financial instruments to which that information relates implies that that person has used that information within the meaning of that provision, but without prejudice to the rights of the defence and, in particular, to the right to be able to rebut that presumption. The question whether that person has infringed the prohibition on insider dealing must be analysed in the light of the purpose of that Directive, which is to protect the integrity of the financial markets and to enhance investor confidence, which is based, in particular, on the assurance that investors will be placed on an equal footing and protected from the misuse of inside information.

Consideration by the Court of Justice: The First Question. By its

first question, the referring court asks whether the Directive 2003/6/EC on market abuse constitutes a complete harmonisation of the prohibition on insider dealing, with the result that Member States may not lay down a stricter definition than that set out in Article 2(1) of that Directive.

It is apparent from the decision to refer that that question was raised on the hypothesis that, on a proper interpretation of Article 2(1) of the directive, the carrying out by a primary insider holding

inside information of a market transaction in financial instruments to which that information relates cannot imply that that person used that information within the meaning of that provision. However, given the reply to the second and third questions referred, that hypothesis does not apply. Therefore, there is no need to reply to the first question.

Consideration by the Court of Justice: The Fourth and Fifth Questions. By these two questions, which should be examined together, the referring court essentially asks whether, in order to sanction insider dealing while respecting the principle of proportionality, it is necessary to take account of the gains realised, and if so, what date should be taken as the basis for gauging those gains.

That court also asks whether the disclosure of inside information must be deemed to have influenced the price of the financial instrument concerned, and, if so, what is the threshold above which that influence may be regarded as significant.

In response to that latter point, it should be noted that the capacity of information to have a significant effect on the price of the financial instruments to which it relates is one of the characteristic elements of the concept of inside information.

The expression inside information, as defined in Article 1(1) of the Directive 2003/6/EC on market abuse, is characterised, in particular, by the fact that, if that information were made public, it 'would be likely to have a significant effect on the price of [the] financial instruments [concerned] or on the price of related derivative financial instruments', that concept having itself been defined in Article 1(2) of the Directive 2003/124/EC implementing the Directive 2003/6/EC as being 'information which a reasonable investor would be likely to use as part of the basis of his investment decisions'.

In accordance with the purpose of the Directive 2003/6/EC on market abuse, that capacity to have a significant effect on prices must be assessed, a priori, in the light of the content of the information at issue and the context in which it occurs. It is thus not necessary, in order to determine whether information is inside information, to examine whether its disclosure actually had a significant effect on the price of the financial instruments to which it relates.

As regards the first part of those questions, it should be noted that Article 14(1) of the Directive 2003/6/EC on market abuse provides that the Member States are to ensure, in conformity with their national law, that appropriate administrative measures can be taken or administrative sanctions be imposed against the persons responsible for infringements of provisions adopted in the implementation of the directive. In that regard, the Member States are to ensure that those measures are effective, proportionate and dissuasive.

It must be noted that Article 14(1) of the Directive 2003/6/EC on market abuse does not establish any criteria for assessing how effective, proportionate and dissuasive a sanction is. It is for national legislation to define those criteria.

It should be noted, however, that the recital No. 38 in the Preamble to the Directive 2003/6/EC on market abuse states that sanctions should be sufficiently dissuasive and proportionate to the gravity of the infringement and to the gains realised and should be consistently applied.

The answer to the fourth and fifth questions must therefore be that, on a proper interpretation of Article 14(1) of the Directive 2003/6/EC on market abuse, gains realised from insider dealing may constitute a relevant element for the purposes of determining a sanction which is effective, proportionate and dissuasive. The method of calculation of those economic gains and, in particular,

the date or the period to be taken into account are to be determined by national law.

Consideration by the Court of Justice: The Sixth Question. The

referring court essentially asks whether Article 14(1) of the Directive 2003/6/EC on market abuse must be interpreted as meaning that, if, in addition to the administrative sanctions laid down in that provision, a Member State has introduced the possibility of imposing a criminal financial sanction, account must be taken, at the stage when the administrative sanction is determined, of the possibility and/or the level of a criminal financial sanction which may be subsequently imposed.

Article 14(1) of the Directive 2003/6/EC on market abuse requires of the Member States that the administrative measures or sanctions which they impose on persons responsible for market abuses, such as insider dealing, be effective, proportionate and dissuasive, without prejudice to the rights of the Member States to impose criminal sanctions.

That provision cannot be interpreted as imposing on the competent national authorities the obligation to take into consideration, when determining an administrative financial sanction, the possibility of imposing a subsequent criminal financial sanction. The assessment of how effective, proportionate and dissuasive the administrative sanctions laid down in the Directive 2003/6/EC on market abuse are cannot depend on a hypothetical criminal sanction which may subsequently be imposed.

Consequently, the answer to the sixth question must be that Article 14(1) of the Directive 2003/6/EC on market abuse is to be interpreted as meaning that, if, in addition to the administrative sanctions laid down in that provision, a Member State has introduced the possibility of a criminal financial sanction, it is not necessary, for the purposes of assessing whether the administrative sanction is effective, proportionate and dissuasive, to take account of the possibility and/or the level of a criminal sanction which may subsequently be imposed.

Rulings. The Court of Justice in answer to the questions referred to it rules:

1. On a proper interpretation of Article 2(1) of the Directive 2003/6/EC on market abuse, the fact that a person as referred to in the second subparagraph of that provision, in possession of inside information, acquires or disposes of, or tries to acquire or dispose of, for his own account or for the account of a third party, either directly or indirectly, the financial instruments to which that information relates implies that that person has used that information within the meaning of that provision, but without prejudice to the rights of the defence and, in particular, to the right to be able to rebut that presumption. The question whether that person has infringed the prohibition on insider dealing must be analysed in the light of the purpose of that Directive, which is to protect the integrity of the financial markets and to enhance investor confidence, which is based, in particular, on the assurance that investors will be placed on an equal footing and protected from the misuse of inside information.

2. Article 14(1) of the Directive 2003/6/EC on market abuse must be interpreted as meaning that gains realised from insider dealing may constitute a relevant element for the purposes of determining a sanction which is effective, proportionate and dissuasive. The method of calculation of those economic gains and, in particular, the date or the period to be taken into account are to be determined by national law.

3. Article 14(1) of the Directive 2003/6/EC on market abuse must be interpreted as meaning that, if, in addition to the administrative sanctions laid down in that provision, a Member State has intro-

duced the possibility of imposing a criminal financial sanction, it is not necessary, for the purposes of assessing whether the administrative sanction is effective, proportionate and dissuasive, to take account of the possibility and/or the level of a criminal sanction which may subsequently be imposed.

Judgment of the Court of Justice of the European Union of 7 July 2011 - Case C-445/09 - IMC versus Stichting Autoriteit Financiele Markten

Reference for a Preliminary Ruling. The reference for a preliminary ruling concerns the interpretation of Article 1(2)(a), second indent, of the Directive 2003/6/EC on market abuse.

The reference has been made in proceedings between the IMC Securities BV (hereinafter «IMC») and the Netherlands Financial Markets Authority (hereinafter «AFM»; Stichting Autoriteit Financiele Markten), which had imposed a fine on IMC for market manipulation.

Dispute in the Main Proceedings and the Question Referred for a Preliminary Ruling. IMC is a Netherlands firm which trades in securities for its own account. On 11 October 2005, consulting the information published by the Euronext Amsterdam market, IMC established that the ABN AMRO bank had placed a stop loss order on 5 000 Wereldhave shares. Pursuant to that order, those shares automatically had to be sold at the best price possible as soon as the triggering threshold indicated by ABN AMRO was reached.

IMC sought to establish what was the triggering threshold set by ABN AMRO. After calculating a hypothetical threshold, IMC refined its estimate by testing its hypothesis on 12 October 2005 by placing and then withdrawing sell orders before official hours at various prices. As a result, IMC estimated that ABN AMRO's order would be triggered at a price of EUR 77.75.

On 19 October 2005, the price of Wereldhave shares fluctuated between EUR 81.30 and EUR 80. The average volume of transactions was 70 000. IMC thereafter proceeded in two phases.

IMC first of all placed a purchase order on Wereldhave shares at a price of EUR 73, for a total volume of 10 000 shares. This was an iceberg order, that is to say, an order the total quantity of which did not appear in the order books. The price of EUR 73 was approximately 10% lower than the applicable price of the shares, but just above the threshold at which the listing of that share would have been automatically suspended, namely EUR 72.95.

Approximately two minutes later, when Wereldhave shares were being quoted at around EUR 80.40, IMC placed an order for the sale of 10 000 Wereldhave shares with a limit of EUR 76.50. The partial execution of that order had the effect of causing the share price to fall to EUR 76.50. That fall in turn triggered ABN AMRO's order to sell and caused a further fall, from EUR 76.50 to EUR 73, the level corresponding to IMC's purchase order. As a result, IMC was able to acquire 4 350 Wereldhave shares from ABN AMRO at EUR 73. This last phase did not last longer than one second.

Shortly thereafter, a new transaction involving the shares in question made it possible for their price to be set at EUR 80.15. The transaction enabled IMC to realise a profit of almost 10% within a few minutes.

On 24 August 2006, the Netherlands Financial Markets Authority (Stichting Autoriteit Financiele Markten) decided that those facts constituted a prohibited market manipulation and it fined IMC approximately EUR 87 000 for breaching Article 46b(1)(b) of the Law on the Supervision of Securities Transactions of 1995.

By a ruling of 20 December 2007, the District Court of Rotterdam (Rechtbank Rotterdam) reduced the amount of the fine to EUR 20 000.

IMC appealed against that ruling to the Administrative Court for Trade and Industry (College van Beroep voor het bedrijfsleven). That court asks whether a sudden fluctuation in the price of a share, such as that at issue in the main proceedings, can come within the scope of Article 46b(1)(b) of the Law on the Supervision of Securities Transactions of 1995, in so far as under that provision it is prohibited: 'to undertake, or cause the undertaking of, transactions or to place, or cause the placing of, orders to trade with a view to securing (houden) the price of those securities at an artificial level'. The specific question is whether that clause refers only to abnormal or artificial price stabilisation or also embraces an abnormal or artificial price change.

The referring court points out that it is unable, by reason of the nuances in the different language versions of the Directive 2003/6/EC on market abuse, to draw any unambiguous conclusions as to the meaning of the verb houden in the Dutch-language version of Article 1(2)(a), second indent, of that Directive.

It was in those circumstances that the Administrative Court for Trade and Industry (College van Beroep voor het bedrijfsleven) decided to stay proceedings and to refer the following question to the Court of Justice for a preliminary ruling16 - Must the second indent of Article 1(2)(a) of the Directive 2003/6/EC on market abuse be interpreted as meaning that the bringing about of price changes in a time span such as that at issue through the commission of a combination of acts with a financial instrument, namely transactions and orders to trade such as [those at issue in the main proceedings], should be regarded as houden (literally «maintaining») [the price of] such an instrument at an abnormal or artificial level?

Consideration by the Court of Justice. The referring court asks, in essence, whether Article 1(2)(a), second indent, of the Directive 2003/6/EC on market abuse must be interpreted as requiring, in order for the price of one or more financial instruments to be considered to have been fixed at an abnormal or artificial level, that that price must maintain an abnormal or artificial level for more than a certain duration.

It should be noted that the Dutch-language version of Article 1(2)(a), second indent, of the Directive 2003/6/EC on market abuse uses the verb houden (to maintain). The Dutch-language version reads as follows: '«Marktmanipulatie»: a) transacties of handelsorders ... waarbij een of meer personen samenwerken om de koers van een financieel instrument op een abnormaal of een kunstmatig niveau te houden.' That wording, which translates literally as '«Market manipulation»: ... transactions or orders to trade ... by which a person, or persons acting in collaboration, maintain the price of one or several financial instruments at an abnormal or artificial level' could suggest that only conduct by which, during a certain time span, the price was maintained at an abnormal or artificial level falls within the meaning of market manipulation.

However, for the purpose of its interpretation, Article 1(2)(a), second indent, of the Directive 2003/6/EC on market abuse cannot be examined solely in the Dutch-language version.

According to settled case-law, the need for uniform application and, accordingly, for uniform interpretation of an EU measure makes it impossible to consider one version of the text in isolation, but requires that it be interpreted on the basis of both the real intention of its author and the aim which the latter seeks to

16 Reference for a preliminary ruling from the Administrative Court for Trade and Industry (College van Beroep voor het bedrijfsleven) (The Netherlands) lodged on 16 November 2009 - 1. IMC Securities BV, 2. Financial Markets Authority (Stichting Autoriteit Financiele Markten) (Case C-445/09).

achieve, in the light, in particular, of the versions in all languages (see, among others, case 29/69, Stauder, para. 3; joined cases C-261/08 and C-348/08, Zurita Garcia and Choque Cabrera, para. 54; and case C-473/08, Eulitz, para. 22).

As it is, versions of Article 1(2)(a), second indent, of the Directive 2003/6/EC on market abuse in languages other than Dutch contain no information which would allow the conclusion to be drawn that only conduct which has the effect of maintaining the price of one or more relevant financial instruments at an abnormal or artificial level for a certain period of time may constitute 'market manipulation' within the meaning of that provision. By contrast, it follows from, among others, the versions in Spanish ('aseguren . el precio'), Danish ('sikrer at kursen'), German ('den Kurs ... in der Weise beeinflussen, dass ein ... Kursniveau erzielt wird'), English ('secure ... the price'), French ('fixent ... le cours'), Italian ('fissare ... il prez-zo'), Portuguese ('assegurem ... o preço'), Finnish ('varmistaa ... hinnan') and Swedish ('laser fast priset'), that it is sufficient if the conduct in question has led to the setting of the price of one or more financial instruments at an abnormal or artificial level in order for it to come within the meaning of market manipulation. Article 1(2)(a), second indent, of the Directive 2003/6/EC on market abuse does not require, among the factors constituting market manipulation, that the price of the financial instrument or instruments at issue must maintain an abnormal or artificial level for a certain duration.

In that respect, it should be noted that the purpose of the Directive 2003/6/EC on market abuse - as is reiterated, in particular, in recitals No. 2 and 12 in the Preamble thereto - is to protect the integrity of EU financial markets and to enhance investor confidence in those markets. That confidence depends on, among others, investors being placed on an equal footing and protected against the improper use of insider information and price manipulations (see, to that effect, case C-45/08, Spector Photo Group and Van Raemdonck, para. 47).

The EU legislature took the view, as is stated in recital No. 15 in the Preamble to the Directive 2003/6/EC on market abuse, that insider dealing and market manipulation prevent full and proper market transparency, which is a prerequisite for trading for all economic actors in integrated financial markets.

The objectives thus pursued by the Directive 2003/6/EC on market abuse would be undermined if conduct such as that contemplated in Article 1(2)(a), second indent, of that Directive could fall outside the scope of the prohibition of market manipulation set out in Article 5 of that Directive solely on the ground that it gave rise to a single transaction and, consequently, a single listing, without the price of the financial instrument or instruments at issue maintaining an abnormal or artificial level for more than a certain duration.

The answer to the question referred is therefore that Article 1(2)(a), second indent, of the Directive 2003/6/EC on market abuse must be interpreted as not requiring, in order for the price of one or more financial instruments to be considered to have been fixed at an abnormal or artificial level, that that price must maintain an abnormal or artificial level for more than a certain duration.

Rulings. The Court of Justice in answer to the question referred to it rules: Article 1(2)(a), second indent, of the Directive 2003/6/EC on market abuse must be interpreted as not requiring, in order for the price of one or more financial instruments to be considered to have been fixed at an abnormal or artificial level, that that price must maintain an abnormal or artificial level for more than a certain duration.

Judgment of the Court of Justice of the European Union of 28 June 2012 - Case C-19/11 - Markus Geltl versus Daimler AG

Reference for a Preliminary Ruling. The reference for a preliminary ruling concerns the interpretation of point 1 of Article 1 of the Directive 2003/6/EC on market abuse, and also Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC.

The reference has been made in proceedings between Mr Geltl and Daimler AG (hereinafter «Daimler'») concerning the loss he claims to have suffered as a result of the allegedly late public disclosure by that company of information relating to the early departure of the Chairman of its Board of Management.

Dispute in the Main Proceedings and the Question Referred for a Preliminary Ruling. The order for reference indicates that, following general meeting on 6 April 2005, Mr Schrempp, Chairman of Daimler's Board of Management, was thinking of tendering his resignation before the expiry of his mandate in 2008. On 17 May 2005, he discussed his intentions with the Chairman of the Supervisory Board, Mr Kopper. Between 1 June and 27 July 2005, other members of the Supervisory Board and the Board of Management were also informed of Mr Schrempp's plans to resign.

As from 10 July 2005, Daimler began preparing a press release, an external statement and a letter to Daimler's employees.

On 13 July 2005, an invitation was issued convening a meeting of the Presidential Committee of Daimler's Supervisory Board (hereinafter «Presidential Committee») and the Supervisory Board on 27 and 28 July 2005, respectively; neither invitation mentioned a possible change of Chairman of the Board of Management.

On 18 July 2005, Messrs Schrempp and Kopper agreed to propose Mr Schrempp's early departure and Mr Zetsche's appointment as his successor at the Supervisory Board's meeting on 28 July 2005.

At its meeting, which commenced at 17 hrs on 27 July 2005, the Presidential Committee decided that it would propose to the Supervisory Board, which was meeting the next day, that it approve said departure and said appointment.

At approximately 9.50 hrs on 28 July 2005, Daimler's Supervisory Board decided that Mr Schrempp would step down at the end of the year and be replaced by Mr Zetsche.

An announcement of that decision was sent to the management of the stock exchanges and of the Federal Office for the Supervision of Financial Services (Bundesanstalt für Finanzdienstleistungsaufsicht) and was published in the disclosures database of the Deutsche Gesellschaft für Ad-hoc-Publizitat (German ad hoc disclosure company).

Following that announcement, Daimler's share price, which had already risen that day following publication of the 2005 second quarter results that morning, rose sharply.

Mr Geltl and a number of other investors had sold Daimler shares before that announcement. They brought an action against Daimler before the Regional Court in Stuttgart (Landgericht Stuttgart) seeking compensation for what they considered to be a late ad hoc announcement. That court asked the Higher Regional Court in Stuttgart (Oberlandesgericht Stuttgart) to rule on a number of questions in relation to those disputes in a test case ('Musterverfahren').

In its test decision of 22 April 2009, the Higher Regional Court in Stuttgart (Oberlandesgericht Stuttgart) held that it could not be proven that, on 17 May 2005 or subsequently, there was inside information to the effect that Mr Schrempp would resign unilaterally, whether or not Daimler's Supervisory Board approved. In that court's view, the decisive price-relevant event is the Supervisory Board's decision of 28 July 2005. That decision had become suffi-

ciently likely after the Presidential Committee had decided, after 17 hrs on 27 July 2005, to propose to the Supervisory Board to adopt it. Therefore, there was inside information only as from that date. The Higher Regional Court in Stuttgart (Oberlandesgericht Stuttgart) acknowledged that not all of the conditions for delaying the public disclosure of that information, as provided for in Paragraph 15(3) of the Law on Securities Trading, were fulfilled, but held that the loss alleged by the plaintiffs would have occurred even if those conditions had been fulfilled.

On appeal, the referring court observes that the Higher Regional Court in Stuttgart (Oberlandesgericht Stuttgart) did not consider whether the individual steps leading up to the decision of 28 July 2005 were such as to influence Daimler's share price. On the other hand, in proceedings for the imposition of a fine relating to the same circumstances as those in the main proceedings in the present case, the Higher Regional Court in Frankfurt am Main (Oberlandesgericht Frankfurt am Main) considered that the combining of a number of independent circumstances into a single overall decision is contrary to the wording of the first sentence of Paragraph 13(1) of the Law on Securities Trading and of Directives Directive 2003/6/EC on market abuse and 2003/124/EC implementing the Directive 2003/6/EC and that, therefore, the disclosure obligation exists as soon as the internal process has led to a definite fact and a decision-maker of the undertaking in question has been notified.

In those circumstances, the Federal Court of Justice (Bundesgerichtshof) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:17

1. For the purposes of applying point 1 of Article 1 of the Directive 2003/6/EC on market abuse and Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC, is account to be taken, in the case of a protracted process intended, over the course of a number of intermediate steps, to bring about a particular circumstance or to generate a particular event, only of whether that future circumstance or future event is to be regarded as precise information within the meaning of those provisions of the directives, meaning that it must be examined whether that future circumstance or future event may reasonably be expected to occur, or, in the case of a protracted process of this kind, can intermediate steps which already exist or have already occurred and which are connected with bringing about the future circumstance or event also constitute precise information within the meaning of the aforementioned provisions of the directives?

2. Does the expression «may reasonably be expected» within the meaning of Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC require that the probability be assessed as predominant or high, or does the reference to circumstances which may reasonably be expected to come into existence or events which may reasonably be expected to occur imply that the degree of probability depends on the extent of the effects on the issuer and that, where prices are highly likely to be affected, it is sufficient if the occurrence of the future circumstance or event is uncertain but not improbable?

Consideration18 by the Court of Justice: The First Question. By its first question, the referring court asks, in essence, whether point 1 of Article 1 of the Directive 2003/6/EC on market abuse and Article 1(1) of the Directive 2003/124/EC implementing the Directive

17 Reference for a preliminary ruling from the Federal Court of Justice (Bundesgerichtshof) (Germany) lodged on 14 January 2011 - Markus Geltl versus Daimler AG (Case C-19/11).

18 See also: Opinion of Advocate General Mengozzi delivered on 21 March 2012 - Case C-19/11 - Markus Geltl versus Daimler AG.

2003/6/EC must be interpreted as meaning that, in the case of a protracted process intended to bring about a particular circumstance or to generate a particular event, not only may that future circumstance or future event be regarded as precise information within the meaning of those provisions, but also the intermediate steps of that process which already exist or have already occurred and which are connected with bringing about the future circumstance or event.

Recital No. 3 in the Preamble to the Directive 2003/124/EC implementing the Directive 2003/6/EC states that that Directive aims to give a closer definition of the notion of precise information used in the Directive 2003/6/EC on market abuse in order to enhance legal certainty for market participants.

According to Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC, information is to be deemed to be of a precise nature if two cumulative conditions are satisfied. Firstly, the information must refer to a set of circumstances which exists or may reasonably be expected to come into existence or an event which has occurred or may reasonably be expected to do so. Secondly, it must be specific enough to enable a conclusion to be drawn as to the possible effect of that set of circumstances or event on the prices of the financial instruments concerned or related derivative financial instruments.

Since the terms set of circumstances and event are not defined in that Directive, it is appropriate to look at their ordinary meaning.

An intermediate step in a protracted process may in itself constitute a set of circumstances or an event in the meaning normally attributed to those terms.

That finding is supported by Article 3(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC, which gives, by way of examples of inside information the disclosure of which may be delayed under Article 6(2) of the Directive 2003/6/EC on market abuse, situations which are typical examples of intermediate steps in protracted processes, namely negotiations in course and decisions taken or contracts made by the management body of an issuer which need the approval of another body of the issuer in order to become effective.

Moreover, as is evident from recitals No. 2 and 12 in the Preamble thereto, the purpose of the Directive 2003/6/EC on market abuse is to protect the integrity of the European Union financial markets and to enhance investor confidence in those markets. That confidence depends on, among others, investors being placed on an equal footing and protected against the improper use of insider information (see, to that effect, case C-45/08, Spector Photo Group and Van Raemdonck, para. 47, and case C-445/09, IMC Securities, para. 27).

In that regard, recital No. 24 in the Preamble to that Directive states that prompt and fair disclosure of information to the public enhances market integrity, whereas selective disclosure by issuers can lead to a loss of investor confidence in the integrity of financial markets.

An interpretation of the terms set of circumstances and event which disregards the intermediate steps in a protracted process risks undermining the objectives as referred to in the two preceding paragraphs of this judgment. To rule out the possibility that information relating to such a step in a protracted process may be of a precise nature for the purposes of point 1 of Article 1 of the Directive 2003/6/EC on market abuse would remove the obligation, provided for in the first subparagraph of Article 6(1), to disclose that information, even if it were quite specific and even though the other elements making up inside information were also present.

In such a situation, certain parties who possessed inside information could be in an advantageous position vis-à-vis other investors and be able to profit from that information, to the detriment of those who are unaware of it (see, to that effect, case C-45/08, Spector Photo Group and Van Raemdonck, para. 48).

The risk of such a situation occurring is all the greater given that it would be possible, in certain circumstances, to regard the outcome of a specific process as an intermediate step in another, larger process.

Consequently, information relating to an intermediate step which is part of a protracted process may be precise information. It should be noted that this interpretation does not hold true only for those steps which have already come into existence or have already occurred, but also concerns, under Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC, steps which may reasonably be expected to come into existence or occur.

The categorisation of information as precise must also satisfy the second condition laid down in that provision, that is to say, the information must be specific enough to enable a conclusion to be drawn as to the possible effect of that set of circumstances or event in question on the prices of the financial instruments concerned.

The answer to the first question is therefore that point 1 of Article 1 of the Directive 2003/6/EC on market abuse and Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC must be interpreted as meaning that, in the case of a protracted process intended to bring about a particular circumstance or to generate a particular event, not only may that future circumstance or future event be regarded as precise information within the meaning of those provisions, but also the intermediate steps of that process which are connected with bringing about that future circumstance or event.

Consideration by the Court of Justice: The Second Question. By its second question, the referring court asks, in essence, whether Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC must be interpreted as meaning that the notion of «a set of circumstances which exists or may reasonably be expected to come into existence or an event which has occurred or may reasonably be expected to do so» refers only to circumstances or events the occurrence of which may be considered to be preponderant or highly probable, or whether that notion implies that the magnitude of the effect of that set of circumstances or that event on the prices of the financial instruments concerned must be taken into consideration.

There is a certain divergence between the various language versions of that provision. Thus, some of the versions, including the French, Italian and Dutch texts, use terms equating to 'may reasonably be thoughf, whilst other versions, including the Danish, Greek, English and Swedish texts, employ terms equating to may reasonably be expected. The Spanish and Portuguese versions refer to 'a set of circumstances which may reasonably exist' and 'a reasonably foreseeable set of circumstances or event'. Lastly, the German text uses terms equating to 'with a sufficient degree of probability' (mit hinreichender Wahrscheinlichkeit).

According to settled case-law, firstly, the wording used in one language version of a provision of European Union law cannot serve as the sole basis for the interpretation of that provision, or be made to override the other language versions in that regard. Secondly, the various language versions of a text of European Union law must be given a uniform interpretation and hence, in the case of divergence between the language versions, the provi-

sion in question must be interpreted by reference to the purpose and general scheme of the rules of which it forms a part (see case C-215/10, Pacific World and FDD International, para. 48 and the case-law cited).

Apart from the German version, all the other language versions of Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC existing at the time it was adopted use the adverb 'reasonably*. By using that term, the European Union legislature introduced a criterion based on rules drawn from the common experience in order to determine whether or not future circumstances and events come within the scope of that provision.

In order to determine whether it is reasonable to think that a set of circumstances will come into existence or that an event will occur, an assessment must be made on a case-by-case basis of the factors existing at the relevant time.

Consequently, Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC, in using the terms may reasonably be expected, cannot be interpreted as requiring that proof be made out of a high probability of the circumstances or events in question coming into existence or occurring.

To restrict the scope of point 1 of Article 1 of the Directive 2003/6/EC on market abuse and Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC in respect of future circumstances and events to such a degree of probability would undermine the objectives referred above, namely to protect the integrity of the European Union financial markets and to enhance investor confidence in those markets. In such a scenario, insiders would be able to derive undue benefit from certain information which, under such a restrictive interpretation, would be held not to be precise, to the detriment of others who are unaware of it.

However, in order to ensure legal certainty for market participants, including issuers, as referred to in recital No. 3 in the Preamble to the Directive 2003/124/EC implementing the Directive 2003/6/EC, precise information is not to be considered as including information concerning circumstances and events the occurrence of which is implausible. Otherwise, issuers could believe that they are obliged to disclose information which is not specific or is unlikely to influence the prices of their financial instruments.

It follows that, in using the terms may reasonably be expected, Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC refers to future circumstances or events from which it appears, on the basis of an overall assessment of the factors existing at the relevant time, that there is a realistic prospect that they will come into existence or occur.

The question whether the required probability of occurrence of a set of circumstances or an event may vary depending on the magnitude of their effect on the prices of the financial instruments concerned must be answered in the negative.

In the first place, there is nothing to infer such an interpretation of the meaning of the terms may reasonably be expected from any of the language versions referred to in this judgment.

Secondly, an interpretation to the effect that, the greater the magnitude of the possible effect of a future event on the prices of the financial instruments concerned may be, the lower the degree of probability required in order for the information in question to be held to be precise, would imply that the two elements required for information to be inside information, set out in Article 1(1) and (2) of the Directive 2003/124/EC implementing the Directive 2003/6/EC respectively, namely that the information must be precise and must be likely to have a significant effect on the prices of the financial instruments concerned, are co-dependent.

The specific criteria set out in those two paragraphs are minimum conditions which must each be satisfied in order for information to be held to be inside information within the meaning of point 1 of Article 1 of the Directive 2003/6/EC on market abuse.

As observed by the United Kingdom Government in its observations submitted to the Court, the possibility cannot be ruled out that information relating to an event which is unlikely to occur may have a significant effect on the price of the relevant issuer's securities in that the consequences of that event might have particularly strong consequences for the issuer. That does not necessarily mean that the event will occur.

It is true that, as is apparent from recital No. 1 in the Preamble to the Directive 2003/124/EC implementing the Directive 2003/6/EC, reasonable investors base their investment decisions on all ex ante available information. They must therefore take into consideration not only the 'anticipated impact' of an event on the issuer, but also the degree of probability that the event will occur. Such considerations, however, go to determining whether information is liable to have a significant effect on the prices of the issuer's financial instruments.

In the light of the foregoing considerations, the answer to the second question is that Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC must be interpreted as meaning that the notion of 'a set of circumstances which exists or may reasonably be expected to come into existence or an event which has occurred or may reasonably be expected to do so' refers to future circumstances or events from which it appears, on the basis of an overall assessment of the factors existing at the relevant time, that there is a realistic prospect that they will come into existence or occur. However, that notion should not be interpreted as meaning that the magnitude of the effect of that set of circumstances or that event on the prices of the financial instruments concerned must be taken into consideration.

Rulings. The Court of Justice in answer to the questions referred to it rules:

1. Point 1 of Article 1 of the Directive 2003/6/EC on market abuse and Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC must be interpreted as meaning that, in the case of a protracted process intended to bring about a particular circumstance or to generate a particular event, not only may that future circumstance or future event be regarded as precise information within the meaning of those provisions, but also the intermediate steps of that process which are connected with bringing about that future circumstance or event.

2. Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC must be interpreted as meaning that the notion of 'a set of circumstances which exists or may reasonably be expected to come into existence or an event which has occurred or may reasonably be expected to do so' refers to future circumstances or events from which it appears, on the basis of an overall assessment of the factors existing at the relevant time, that there is a realistic prospect that they will come into existence or occur. However, that notion should not be interpreted as meaning that the magnitude of the effect of that set of circumstances or that event on the prices of the financial instruments concerned must be taken into consideration.

Judgment of the Court of Justice of the European Union of 11 March 2015 - Case C-628/13 - Jean-Bernard Lafonta versus Financial Markets Authority

Reference for a Preliminary Ruling. The request for a preliminary ruling concerns the interpretation of point (1) of Article 1 of the

Directive 2003/6/EC on market abuse and Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC.

The request has been made in proceedings between Mr Lafonta and French Financial Markets Authority (Autorité des marchés financiers; hereinafter «AMF») concerning the decision of 13 December 2010 by which the Penalties Commission of the AMF ordered Mr Lafonta to pay a financial penalty for failing to make public, among others, information relating to a financial operation which enabled Wendel SA to acquire a significant shareholding in the Saint-Gobain group (hereinafter «Saint-Gobain»).

Dispute in the Main Proceedings and the Question Referred for a Preliminary Ruling. The order for reference relates that, between December 2006 and June 2007, Wendel - a company of which Mr Lafonta was chairman of the Board of Directors - concluded with four credit institutions 'total return swap agreements' (hereinafter «TRSs»), the underlying assets of which were shares in Saint-Gobain. In order to hedge their positions, those institutions acquired a total of 85 million shares in Saint-Gobain. At the same time as its entry into the TRSs, Wendel obtained financing, from the banks and another credit institution, for a total amount close to that of the TRSs.

After deciding on 3 September 2007 to phase out the TRSs progressively, Wendel acquired, between that date and 27 November 2007, more than 66 million shares, representing 17.6% of the share capital of Saint-Gobain. Between 26 September 2007 and 26 March 2008, Wendel informed the AMF that it had exceeded the thresholds of 5%, 10%, 15% and 20% of Saint-Gobain's share capital.

Following an inquiry into the increase in the capital of Saint-Gobain, the AMF found that, although Wendel had officially taken the decision on 3 September 2007 to transform the economic exposure to Saint-Gobain into an actual shareholding in that company, the evidence contained in the inquiry report, and the simultaneous nature of the signing of the TRS agreements and Wendel's acquisition of financing enabling it subsequently to acquire the Saint-Gobain shares sold by the banks in the context of the phasing out of the TRSs, show that Wendel had intended from the outset to acquire a significant shareholding in Saint-Gobain's capital and that it was primarily for that purpose that the operation in question had been carried out.

Accordingly, the AMF accused Wendel and Mr Lafonta of failing to make public the principal characteristics of the financial operation, prepared by Wendel and designed to enable it to acquire a significant shareholding in Saint-Gobain's capital - and of failing to make that information public by 21 June 2007 at the latest, at which date all the TRSs had been concluded - and of failing to make public, before Wendel incurred the obligation to report the passing of the 5% threshold, the inside information as to Wendel's implementation of that financial operation for the purposes of acquiring a substantial shareholding in Saint-Gobain's capital.

By decision of 13 December 2010, the Penalties Commission of the AMF held those complaints to be well founded and imposed a financial penalty on Wendel and Mr Lafonta in the amount of EUR 1.5 million.

Mr Lafonta brought an action before the Court of Appeal of Paris (Cour d'appel de Paris) for the annulment of that decision to the extent that it imposed a financial penalty on him. By judgment of 31 May 2012, the Court of Appeal of Paris (Cour d'appel de Paris) dismissed the action.

Mr Lafonta lodged an appeal in cassation against that judgment. As grounds for that appeal, Mr Lafonta submits that information is precise for the purposes of the second subparagraph of Article 621-

1 of the General Regulation of the AMF, to which Article 223-2 of that regulation refers, only 'if it indicates a set of circumstances which exists or may reasonably be expected to come into existence or an event which has occurred or may reasonably be expected to do so and if it enables a conclusion to be drawn from it as to the possible effect of that set of circumstances or event on the price of financial instruments or related financial instruments'. It follows, according to Mr Lafonta, that information is precise, for the purposes of that provision, only if it allows the person in possession of that information to anticipate how the price of the security concerned will change when that information is made public. He argues that only information that enables the person in possession of it to predict whether the price of the security concerned is going to increase or decrease allows that person to know whether he should buy or sell and, accordingly, grants him an advantage as compared with all the other actors on the market, who are unaware of that information. Mr Lafonta adds that, in the circumstances, it was impossible to predict whether the disclosure of the information concerning Wendel's acquisition of a shareholding in Saint-Gobain would result in an increase or a decrease in Wendel's share price.

The AMF responds that such a requirement goes beyond the wording of the Directive 2003/6/EC on market abuse and the Directive 2003/124/EC implementing the Directive 2003/6/EC, in which no reference is made to the direction of the possible effect on the prices of the financial instruments concerned. According to the AMF, any information in respect of which it may be concluded that, if it were known, it would be likely to bring about a change in prices, constitutes, for that reason alone, precise information, as the distinction between precise information and imprecise information is the likelihood of its having an effect on the market.

In those circumstances, the Court of Cassation (Cour de cassation) decided to stay proceedings and to refer the following question to the Court for a preliminary ruling19 - Must point (1) of Article 1 of the Directive 2003/6/EC on market abuse and Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC be interpreted as meaning that only information in respect of which it may be determined, with a sufficient degree of probability, that, once it is made public, its potential effect on the prices of the financial instruments concerned will be in a particular direction may constitute inside information?

Consideration20 by the Court of Justice. The first point to note is that, according to recitals No. 2 and 12 to the Directive 2003/6/EC on market abuse, the purpose of that Directive is to protect the integrity of the EU financial markets and to enhance investor confidence in those markets. That confidence depends on, among others, investors being placed on an equal footing and protected against the improper use of insider information (see, to that effect, judgments in case C-45/08, Spector Photo Group and Van Raemdonck, para. 47; case C-445/09, IMC Securities, para. 27; and case C-19/11, Geltl, para. 33).

To that end, whereas Article 2(1) of the Directive 2003/6/EC on market abuse prohibits insider dealing, Article 6(1) of that Directive places issuers of financial instruments under an obligation to in-

19 Request for a preliminary ruling from the Court of Cassation (Cour de cassation) (France) lodged on 2 December 2013 - Jean-Bernard Lafonta versus Financial Markets Authority (Autorité des marchés financiers) (France) (Case C-628/13).

20 See also: Opinion of Advocate General Wathelet delivered on 18 December 2014 - Case C-628/13 - Jean-Bernard Lafonta versus Financial Markets Authority (Autorité des marchés financiers) (France).

form the public as soon as possible of inside information which directly concerns those issuers. As recital No. 24 to the Directive 2003/6/EC on market abuse states, prompt and fair disclosure of information to the public enhances market integrity, whereas selective disclosure by issuers can lead to a loss of investor confidence in the integrity of financial markets.

Under the first paragraph of point (1) of Article 1 of the Directive 2003/6/EC on market abuse, inside information is defined as 'information of a precise nature which has not been made public', which relates to one or more issuers of financial instruments or to one or more financial instruments and which, 'if it were made public, would be likely to have a significant effect on the prices of those financial instruments or on the price of related derivative financial instruments'.

Thus, the definition of inside information under that provision comprises four essential elements: (i) the information must be of a precise nature; (ii) the information must not have been made public; (iii) it must relate, directly or indirectly, to one or more financial instruments or their issuers; and (iv) it must be information which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments or on the price of related derivative financial instruments (see, to that effect, case C-19/11, Geltl, para. 25).

The Court has pointed out that, owing to its non-public and precise nature and its ability to influence significantly the prices of the financial instruments concerned, inside information grants the insider in possession of such information an advantage in relation to all the other actors on the market, who are unaware of it (see judgment in case C-45/08, Spector Photo Group and Van Raemdonck, para. 52).

It is also important to note that, in order to enhance legal certainty for market participants, the Directive 2003/124/EC implementing the Directive 2003/6/EC was intended - as is apparent from recital No. 3 thereto - to define more closely the first and fourth elements essential to the definition of inside information.

Accordingly, as regards the first element, Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC provides that information 'shall be deemed to be of a precise nature if it indicates a set of circumstances which exists or may reasonably be expected to come into existence or an event which has occurred or may reasonably be expected to do so and if it is specific enough to enable a conclusion to be drawn as to the possible effect of that set of circumstances or event on the prices of financial instruments or related derivative financial instruments'. As regards the fourth element, Article 1(2) of that Directive states that information likely to have a significant effect on the price of financial instruments is information which 'a reasonable investor would be likely to use as part of the basis of his investment decisions'.

The Court has held that those two elements, essential to the definition of inside information and defined more closely in Article 1 of the Directive 2003/124/EC implementing the Directive 2003/6/EC, are mutually independent and constitute minimum conditions, each of which must be met if information is to be regarded as inside information for the purposes of point (1) of Article 1 of the Directive 2003/6/EC on market abuse (see, to that effect, case C-19/11, Geltl, para. 52 and 53).

It should be noted that, by its question, the referring court seeks solely to obtain clarification regarding the first element essential to the definition of inside information, that is to say, regarding the 'precise' nature of that information.

It should be noted in that connection that it is not apparent from the wording of Article 1 of the Directive 2003/124/EC implement-

ing the Directive 2003/6/EC that precise information covers only information which makes it possible to determine the likely direction of a change in the prices of the financial instruments concerned, or the prices of related derivative financial instruments.

If the terms used in Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC are given their plain and ordinary meaning, it must be held that, for the condition in question to be satisfied, it is enough that the information be sufficiently exact or specific to constitute a basis on which to assess whether the set of circumstances or the event in question is likely to have a significant effect on the price of the financial instruments to which it relates. Consequently, the only information excluded from the concept of inside information by virtue of that provision is information that is vague or general, from which it is impossible to draw a conclusion as regards its possible effect on the prices of the financial instruments concerned.

That interpretation is borne out both by the general scheme of Article 1 of the Directive 2003/124/EC implementing the Directive 2003/6/EC and by the purpose of the Directive 2003/6/EC on market abuse.

As regards the general scheme of Article 1 of the Directive 2003/124/EC implementing the Directive 2003/6/EC, Mr Lafonta submits that information cannot be regarded as precise unless it enables the holder of that information to anticipate the direction of a change in the prices of the financial instrument concerned, since only information that meets that condition would enable the holder to determine whether that financial instrument should be acquired or disposed of and, as a result, gives the holder of that information an advantage over all the other actors on the market.

It should be pointed out in that connection that, in common with Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC, Article 1(2) of that Directive does not require that the information make it possible to determine the direction of change in the prices of the financial instruments concerned. A particular item of information can be used by a reasonable investor as one of the grounds for his investment decision and, accordingly, satisfy the condition laid down in Article 1(2) of that Directive, even though it does not make it possible to determine the movement in a given direction of the prices of the financial instruments concerned.

As regards the purpose of the Directive 2003/6/EC on market abuse, it should be observed that to confine the scope of point (1) of Article 1 of the Directive 2003/6/EC on market abuse and Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC solely to information which makes it possible to anticipate the direction of a change in the prices of those instruments

risks undermining the objectives referred above.

The increased complexity of the financial markets makes it particularly difficult to evaluate accurately the direction of a change in the prices of those instruments, as was stated in recital No. 1 to the Directive 2003/124/EC implementing the Directive 2003/6/EC, which refers to several factors likely to affect those prices in a given situation. In those circumstances - which can lead to widely differing assessments, depending on the investor -if it were accepted that information is to be regarded as precise only if it makes it possible to anticipate the direction of a change in the prices of the instruments concerned, it would follow that the holder of that information could use an uncertainty in that regard as a pretext for refraining from making certain information public and thus profit from that information to the detriment of the other actors on the market.

It should also be noted in that context that the travaux préparatoires for the Directive 2003/124/EC implementing the Directive 2003/6/EC disclose that a reference to the possibility of drawing a conclusion as regards the 'direction' of the effect of the information on the price of the financial instruments concerned, made in the version, subject to public consultation, of technical advice CESR/02-089d issued in December 2002 by the Committee of European Securities Regulators (CESR), for the European Commission and entitled 'CESR's Advice on Level 2 Implementing Measures for the proposed Market Abuse Directive', was later deleted precisely in order to avoid such a reference being used as a pretext for not making information public.

In the light of all the foregoing, the answer to the question referred is that, on a proper construction of point (1) of Article 1 of the Directive 2003/6/EC on market abuse and Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC, in order for information to be regarded as being of a precise nature for the purposes of those provisions, it need not be possible to infer from that information, with a sufficient degree of probability, that, once it is made public, its potential effect on the prices of the financial instruments concerned will be in a particular direction.

Rulings. The Court of Justice in answer to the question referred to it rules: On a proper construction of point (1) of Article 1 of the Directive 2003/6/EC on market abuse and Article 1(1) of the Directive 2003/124/EC implementing the Directive 2003/6/EC, in order for information to be regarded as being of a precise nature for the purposes of those provisions, it need not be possible to infer from that information, with a sufficient degree of probability, that, once it is made public, its potential effect on the prices of the financial instruments concerned will be in a particular direction.

Статья проверена программой «Антиплагиат».

Статья поступила в редакцию 06.09.2020, принята к публикации 26.09.2020 The article was received on 06.09.2020, accepted for publication 26.09.2020

INFORMATION ABOUT THE AUTHOR

Libor Klimek, Associate Professor at the Department of Criminal Law, Criminology, Criminalistics and Forensic Disciplines and director of the Criminology and Criminalistics Research Centre at the Faculty of Law, Matej Bel University, Banska Bystrica in Slovak Republic. He is Visiting Professor at the Faculty of Law, Leipzig University in Germany. He is advisor of the Constitutional Court of the Slovak Republic, Scopus Author ID: 55620115400; http://orcid.org/0000-0003-3826-475X, e-mail: libor.klimek@umb.sk

ИНФОРМАЦИЯ ОБ АВТОРЕ

Либор Климек, адъюнкт-профессор кафедры уголовного права, криминологии, криминалистики и криминалистических дисциплин и директором Исследовательского центра криминологии и криминалистики юридического факультета Университета Матея Бела в Банска-Бистрице Словацкой Республики; приглашенный профессор юридического факультета Лейпцигского университета в Германии; советник Конституционного суда Словацкой Республики, Scopus Author ID: 55620115400; http://orcid.org/0000-0003-3826-475X, e-mail: libor.klimek@umb.sk