The Court of Milan afforded on November 16 1994 a case of first impression on the rigging of the stock market by spreading of unsound rumours, covered by sect. 5 of the Insider Trading Act of May 17 1991, n. 157.
Sect. 5 prosecutes, with the imprisonment up to six months and a fine from ITL1,000,000 up to ITL30,000,000, whoever spreads unsound, exaggerated or tendentious informations or simulates operations, which may significantly influence the stock market.
In the case a transactor gave by fax, to third parties and to the Italian National Commission for the Stock Exchange (CONSOB), false informations on the acquisition of the majority stock of a listed company.
The Court held that a person to be guilty of this crime must be actually aware that the informations are false and that they can affect the Market.
The enactment of Sect. 5 as part of the Insider Trading Act raised negative comments in the legal community because it is not intended to cope with "proper" insider trading.
Sect. 5 prosecutes anyone who falsifies informations relevant to the stock market, and not the insider using privileged but true informations to gamble on the stock market for personal profit.
Sect. 5 cope rather with the crime of Market "agiotage".
Besides its provision matches with others: sect. 501 criminal code (simple agiotage), sect. 2628 civ. cod. (corporate agiotage), and sect. 138 of the Banking Act (banking agiotage).
The court held that all these provisions, as well as the anti-insider trading legislation, react to the same mischief and share a common policy: public control over the use of market informations. So these provisions must be constructed together as a whole, in the light of principles laid by EC Directive of November 13 1989 for the realisation of a common capital market and for the protection of equal access conditions to all stock brokers.
So the Court co-ordinated the various provisions on agiotage in a coherent system.
In practice sect. 501 criminal code will be used in cases concerning commodities other than stocks; sect. 2868 civil code will cover shares; sect. 138 of the Banking Act has been limited to the Bank - client relation; and sect. 5 of the Insider Trading Act will cover all cases concerning stocks.
This article is intended to provide general guidelines. Specialist advice should be sought about specific facts.