European Union: ECJ Preliminary Questions On Disclosure Of Inside Information

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 occur.

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.

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