EU court interprets insider dealing

By Leo Gasteen

The European Court of Justice (ECJ) has clarified the elements of insider dealing following a request from the Court of Appeal of Brussels. This clarification resulted in fines totalling EUR 100 000 imposed by the relevant Belgian authority on Spector Photo Group for insider trading.

Following an appeal of a 2006 ruling by Spector Photo Group, the Belgian court sought to determine whether it was 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. As such a request was brought forward for the Court of Justice to interpret the expression "use of inside information". 

In 2003, Spector bought a certain number of its own shares on the Belgian stock exchange (Euronext Brussels). Spector subsequently published certain results and information concerning its commercial policy. The company’s share price then increased.

In 2006, the competent national authority, the CBFA, classed some of those purchases as insider dealing and imposed fines of EUR 80 000 on Spector and EUR 20 000 on Mr Van Raemdonck, a manager. Those parties then brought an action against that decision.

The ECJ referred to the existing directive (2003/6) regarding insider trading, which is based on investor confidence. The ECJ stated that Directive 2003/6 defines insider dealing objectively without the intention behind such dealing being referred to explicitly in its definition.

The ECJ concluded that 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.

 European Court of Justice - Justice and Application -  Full text