Brussels, 29/06/2012 (Agence Europe) - A step preceding a decision by a listed corporation may constitute inside information which must be disclosed to the financial markets, under EU Directive 2003/6 on insider dealing and market abuse.
This was the ruling by the European Court of Justice in Case C-19/11, issued on 28 June 2012, in answer to a question from the Bundesgerichtshof (Federal Court of Justice, Germany) about what “precise information” means exactly. Precise information is one of the four criteria laid down in the directive for “inside information”, and it “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.” The German court has a case before it between a certain Mr Geltl and Daimler AG concerning the loss Geltl claims to have suffered as a result of the allegedly late public disclosure by that company of information relating to the early departure of Mr Schrempp as Chairman of its Board of Management. On 28 July 2005 Daimler's share price rose sharply following the announcement of the decision, adopted the same day, of Daimler's Supervisory Board that Schrempp would step down at the end of the year and be replaced by Mr Zetsche. Geltl had sold Daimler shares before that announcement. The German court asked whether “precise information” about Schrempp's departure could have existed before the 28 July Supervisory Board meeting. On 17 May 2005, Schrempp had already told the head of the Supervisory Board that he was planning to leave, along with other members of the Supervisory Board and Board of Managers.
The Court ruled: “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, but also the intermediate steps of that process which are connected with bringing about that future circumstance or event. 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. This interpretation does not hold true only for those steps which have already come into existence or have already occurred, but also concerns steps which may reasonably be expected to come into existence or occur. Any other interpretation risks undermining the objectives of the directive, which are to protect the integrity of the EU financial markets and to enhance investor confidence in those markets. To rule out the possibility that information relating to an intermediate step in a protracted process may be of a precise nature would remove the obligation 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.” (FG/transl.fl)