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EU court rules there is duty to publicise insider information

[BRUSSELS] The European Union's top court ruled on Wednesday that holders of privileged information had a duty to make it public to prevent insider dealing even if it was not clear how the information would influence prices.

The European Court of Justice judgment came in a case brought by Jean-Bernard Lafonta, former chairman of Wendel, who challenged fines of 1.5 million euros (S$2.24 million) imposed by the French market regulator AFM on him and the French investment group.

Between 2006 and 2007, Wendel concluded total return swap agreements with four banks for a total of 85 million shares in construction group Saint-Gobain.

In 2007, Wendel decided to convert this financial exposure to actual possession of 66 million Saint-Gobain shares, or 17.6 per cent of the company's capital. Wendel held 11.7 percent at the end of 2014, making it the largest individual shareholder.

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The AFM found that Wendel had intended from the outset to acquire a significant shareholding in Saint-Gobain and accused it of failing to make public the principal characteristics of the financial operation.

Mr Lafonta, who left Wendel in 2009, argued there was no need to make the information public because it was not precise enough to infer that it would lead to a rise or a fall in the price of Wendel's shares.

The court ruling said that "precise" information was not limited to information which could indicate the likely direction of price changes of financial instruments.

If it were, the holder of such information could use any uncertainty as a pretext for refraining from making it public and thus potentially make a profit to the detriment of others, the court said.


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