The High Court dismissed a group of shareholders' claims for damages against Cable & Wireless plc based on breaches of the listing rules and the market abuse provisions of the Financial Services and Markets Act 2000 (FSMA). The shareholders had suffered losses as a result of dealing in Cable & Wireless plc’s shares.

The case made it clear that a shareholder does not have a direct cause of action against a company for breaches of the listing rules or the market abuse provisions of FSMA. The court did however indicate that a shareholder may be able to bring a successful claim against a company if the shareholder can establish an action for negligent misstatement provided that the shareholder can establish that the alleged negligence caused them to suffer loss. Proving negligence is, of course, more difficult than simply proving a breach of the listing rules or the market abuse regime.

The case pre-dates the Companies Act 2006 which introduces a further potential remedy under FSMA. A person who acquires shares and who suffers loss as a result of an untrue statement in certain financial statements can now bring a claim directly against the company concerned. In bringing such a claim, there is no need for the shareholder to establish some form of negligence on the part of the company or its officers.

Following the Davies Review, the Government is considering whether to extend this liability to cover not only financial statements but also any other market announcements. If this were to happen, we may see more shareholders seek to recover their share dealing losses where they can show that a statement was untrue or misleading.