In response to questions raised by the German Bundesgerichtshof,
on 28 June 2012 the European Court of Justice
("ECJ") provided guidance on the
question when (premature) information regarding an uncertain event
amounts to inside information that must be disclosed to the market.
The questions raised by the Bundesgerichtshof followed from the
Daimler case where investors allegedly were informed too late about
the departure of the company's CEO.
The relevance of the guidance provided by the ECJ extends to
other cases considering uncertain future events, including in a
merger context (e.g. a possible public bid or a takeover). Under EU
rules, for 'inside information' to exist the information
has to be of a precise nature. Information is deemed to be of a
'precise' nature if it indicates a set of circumstances
which may reasonably be expected to come into existence. Such
information must be disclosed immediately.
The Bundesgerichtshof had asked the ECJ at what point in time it
is reasonable to assume that a set of circumstances will come into
existence. The ECJ ruled that the Market Abuse Directive and
Directive 2003/124/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 that
future circumstance or future event may 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. The
Bundesgerichtshof had also asked the ECJ if there is a duty to
immediately disclose the steps preceding a future event, even if it
is as yet uncertain whether that future event will actually
The ECJ ruled that it may be reasonably assumed that a certain
event will take place if on the basis of a general assessment of
available data it is realistic to presume that this event will
occur. However, according to the ECJ this 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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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