Brussels, 19/12/2014 (Agence Europe) - When a company decides to carry out a financial operation to take a stake in another company, is it forced to publish its plans only if the information in question could be used to determine that it would impact on the share price in either direction, or rather 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?
This is the question that the European Court of Justice has to answer. Advocate General Melchior Wathelet presented his opinions on Thursday 18 December in Case C-628/13 concerning a fine levied on the Wendel company by the French financial markets authority, AMF. Wendel signed a total returns swaps deal with four banks for shares in Saint-Gobain, thus taking upon itself the danger of shares in Saint-Gobain falling as a result of the swaps deal.
Shortly afterwards, however, Wendel officially took the decision to turn the deal into physical shares. AMF says that this decision (and the preparations for it) was made when the contracts were signed with the four banks and claims that Wendel and the head of its board, Jean-Bernard Lafonta, are guilty of insider dealing because they didn't reveal major characteristics of the financial operation to acquire the shares or the privileged information about setting up the financial operation in question, as required by two EU directives on insider dealing and market manipulation (2003/6/EC and 2003/124/EC).
Lafonta then took AMF to court because he says that information is only 'precise' if it allows the person who has it to know in which way the value of the shares concerned will go when the information is made public. He says it is impossible to know the consequences for the value of shares in Wendel of the action undertaken by Wendel vis-à-vis Saint-Gobain. The French appeals court asked the European Court of Justice whether the two directives should 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?
The Advocate General says that restricting the scope of the notion of 'precise' information to only information that can be used to decide in which direction a share's value may go render the directives in question virtually meaningless because it would encourage issuers to be selective in their communication of information. He concluded that information is deemed precise if it is possible to conclude that the circumstances or the event that the information is related to are may lead to a change in either direction in the value of shares. (JK)