Describe the nature and extent of securities litigation in your jurisdiction.
Being an EU jurisdiction, Greece maintains an EU harmonised regulatory environment with respect to financial regulation, including of course securities regulation.
The Greek regulatory framework on securities contains specific rules and is comprised by a plurality of legislative texts (MiFID II, Athens Stock Exchange Regulation, Regulation of Clearing and Settlement of Securities, Regulation of DSS, Regulation of Clearing of Derivatives, legal provisions on the issuance of a prospectus, on mandatory public offerings as well as on the protection against insider trading and market abuse). The aforementioned safety net of securities laws affords ample protection to market players and investors and delineates the nature of securities regulation in this jurisdiction.
The basis for civil disputes is statutory and such disputes derive from securities transactions, mandatory public offerings, prospectus requirements, shareholders disputes, initial or periodic disclosure liability for issuers, claims of clients against investment firms or vice-versa. Civil disputes may additionally take the form of criminal proceedings when special criminal provisions are breached (ie, insider trading) in parallel or if general fraud can be established and may be brought either by an aggrieved party or by the regulator. The latter is also the initiating party of administrative litigation, when sanctions for breach of securities laws are imposed. We mainly refer to civil claims by the term securities litigation. Since the boom of capital markets in Greece, starting around the last years of the 1990s and on, securities litigation in the above forms has kept commercial courts in Greece fairly busy. A very recent highlight is the Folli Follie case, which is expected to produce a wide variety of civil, criminal and administrative claims against the issuer, shareholders, advisers, auditors and other intermediaries involved in the controversy.Available claims
What are the types of securities claim available to investors?
Common law claims are not relevant in this jurisdiction.
With respect to civil litigation, claims may be brought on the basis of the following:
The Market Abuse Regulation (EU) 2014/596 (MAR) and Law 4443/2016, enacting the required measures for ensuring compliance with the MAR and further incorporating Directive 2014/57/EU on criminal sanctions for market abuse, sets the framework on insider dealing, the unlawful disclosure of inside information and market manipulation (market abuse). Should this framework be infringed, an investor suffering damage may invoke the infringement and bring a claim against the party at fault invoking the general tort provisions in parallel.
Law 4514/2018, transposing into Greek legislation the Markets in Financial Instruments Directive 2014/65/EC (MiFID II) as amended, sets out the conduct standards for financial firms and credit institutions providing investment services in order to ensure that potential clients have the necessary knowledge and competence to make an informed investment decision (the suitability and appropriateness principle). In this respect, where a firm fails to comply with its MIFID II obligations, it may have as a consequence the liability of the former under general tort provisions. Furthermore, the said law provides that any investment firm offering algorithmic trading shall ensure that there is a binding written agreement between the investment firm and the client under which the firm shall assume responsibility for the services offered. Hence claimants may pursue claims against such firms arising from liability out of contract.
Further, an investor may bring a claim against auditors/accountants on the basis of tort provisions in the preparation of an audit report on the financial statements in the event the audit is faulty according to the applicable standards (ie, non-compliance with International Accounting Standards - IAS and Law 4308/2014 on Greek Accounting Standards - GAS) or breach of the confidentiality duty.
Law 3401/2005, incorporating Directive 2003/71/EC, provides for a special form of civil liability arising out of the publication of the prospectus and the violation of trust when the prospectus is inaccurate or incomplete. An investor who has incurred damage with respect to securities acquired within the first 12 months from the issuance of the prospectus on the faith of untrue statements contained therein (for instance, false representations in the financial statements) or owing to information omitted although required may raise a claim for compensation against the issuer, the directors, the offeror, the person asking for the admission to trading on a regulated market, the underwriters or other experts.
Law 3461/2006 on mandatory public offerings, incorporating Directive 2004/25/EC on takeover bids, provides for an obligation of a shareholder (offeror) who holds securities of a company and, either exceeds the threshold of one third of the total voting rights of the company, or holds over one-third without exceeding half of total voting rights and acquires securities representing over 3 per cent of total voting rights within twelve months, to launch a mandatory bid for the total securities of the offeree company. In the event of either the breach of the above obligation to launch a mandatory bid or the purchase of the securities at a non-equitable price, the shareholders of the offeree company shall have the right to file a claim on the basis of tort provisions against the offeror. Further, this law provides for civil liability of the offeror, the adviser (ie, credit institutions or investment firms) and the persons responsible for the issuance of the prospectus with respect to the accuracy and completeness of the latter. Provisions of Law 3556/2007 as amended by Law 4374/2016 and currently in force transpose Directive 2013/50/EU amending Directive 2004/109/EC into Greek legislation. The transparency requirements stipulated therein, provide for a regular flow of information through the periodic and ongoing disclosure obligation by the security issuers. To the same end, shareholders holding voting rights of a specific percentage that result in an entitlement to acquire existing shares with voting rights, should also inform issuers of the acquisition, so that the latter are able to inform the investors. Violation of the said obligation may result to liability on the basis of tort provisions.
Regulation (EU) No. 462/2013, amending Regulation (EC) No. 1060/2009 establishes a special form of civil liability regarding credit rating agencies. On the basis of article 35a of the Regulation an investor or issuer may claim damages from a credit rating agency for damage incurred due to infringements listed in its provisions. The conditions of liability are interpreted and applied in accordance with national law. The liability stemming from the Regulation is not exclusive; therefore claims against credit rating agencies can also be founded to the general provisions for tort liability or to the provisions regarding consumer protection. Such claims are not frequent in our jurisdiction.
Investors may also seek protection under the Consumer Law provisions (Law 2251/1994 as amended and in force) in cases involving unfair commercial practices for the provision of investment services (mainly by financial institutions, in the majority of cases brought before Greek courts).
Tort provisions may further apply additionally to establish general tort liability where there is no contract and once intention or negligence is found in the conduct of the parties.Offerings versus secondary-market purchases
How do claims arising out of securities offerings differ from those based on secondary-market purchases of securities?
Claims arising out of securities offerings usually relate to prospectus’ discrepancies and are filed against the issuer and possibly the persons responsible for the prospectus’ content under the above statutory provisions.
Claims arising in the secondary market are mainly either claims against intermediaries for wrong execution or advice provided, or hinge on the inadequate or misleading information concerning the disclosure of obligations of listed companies.Public versus private securities
Are there differences in the claims available for publicly traded securities and for privately issued securities?
Laws on publicly traded securities contain strict provisions (eg, prospectus issuance requirements, the obligations under MIFID II, the market abuse provisions, etc), which ensure effective protection to the buyers of such securities; whereas for privately issued securities, the purchaser has to rely on the seller’s representations and warranties.Primary elements of claim
What are the elements of the main types of securities claim?
Prospectus liability claims on the basis of Law 3401/2005 can be brought against any person responsible for the preparation and issuance of the prospectus and the information contained therein, in case of inaccurate, misleading or omitted information or in case of breach of duty.
With respect to mandatory public offerings, the offeror is required to prepare and publish in good time a prospectus entailing all necessary information relating to the offering to enable the shareholders of the offeree company to reach a properly informed decision on the bid. Consequently, the persons responsible for the issuance of the prospectus may incur liability for non-performance of their duty. Further, under the conditions set out in question 2, the shareholders of the offeree company may bring an action against the offeror on the basis of general tort provisions.
Issuers shall inform the public as soon as possible of inside information which directly concerns them in order to ensure the fast access and complete, correct and timely assessment of the information by the public.
Furthermore issuers shall (i) draw up a list of all persons who have access to inside information and who are working for them under a contract of employment, or otherwise performing tasks through which they have access to inside information (insider list) and provide this insider list to the competent Hellenic Capital Market Commission; and (ii) announce promptly and no later than three business days after the date of the transaction, every transaction conducted relating to securities of the persons discharging managerial positions or persons closely associated to them. Investors who sustained damages owing to the omission of the issuer to announce accurate or complete information or owing to inaccurate information that have been released, in breach of the aforementioned market abuse rules, may seek compensation.
MiFID II sets out the organisational rules with which authorised intermediaries shall comply during the performance of investment services offered. The latter need to be tailored to reflect the investor’s risk profile and economic capacity. Non-conformity to the above rules may have as a consequence the intermediaries’ liability under general tort provisions.Materiality
What is the standard for determining whether the offering documents or other statements by defendants are actionable?
As per prospectus liability claims, liability is established due to a defect in the prospectus rendering it inaccurate or incomplete. ‘Inaccurate’ is the prospectus that entails false or vague information. ‘Incomplete’ is the prospectus that omits information crucial to the investor’s decision. The incorrect or omitted information in the prospectus must be material. The prospectus is considered complete and accurate when its content can be understood by an average investor and the latter can rely on the information contained therein in order to make to a well-informed investment decision.
Under the framework on the prohibition of insider dealing and of unlawful disclosure of inside information, the latter should be false or misleading and directly influencing the investment decision or the price of the securities.Scienter
What is the standard for determining whether a defendant has a culpable state of mind?
Greek civil law stipulates that apart from intent, negligence alone suffices for the establishment of liability. Negligence presupposes the violation of the duty of care. Security litigation is no exception to this rule.
A special provision deviating from the above general principle requires intent or gross negligence for the establishment of liability of credit rating agencies under Regulation 462/2013/EU.Reliance
Is proof of reliance required, and are there any presumptions of reliance available to assist plaintiffs?
Under the prospectus liability rules, the investor is required to prove that he or she relied on the incomplete or inaccurate prospectus when proceeding with his or her investment decision. The same principle applies where the investor, when making an investment decision, relies on false or misleading information published by the issuer, namely by means of the issuer’s financial statements, announcements, etc.
Although it has been argued that the ‘fraud on the market’ doctrine may apply in cases brought before Greek courts in the sense that the financial instruments’ prices reflect the publicly disseminated information (efficient market hypothesis) and that the investor relying on the current price indirectly relies on the said information, Greek judges remain reluctant to depart from the causation principle.Causation
Is proof of causation required? How is causation established?
Proof of causation is a necessary element for any claim. Greek procedural rules stipulate that the claimant has the onus to prove causation unless there is fraud in the market.
Investment service providers bear strict liability; the burden of proof is on them to establish absence of fault.
In claims on the ground of prospectus liability, the investor has the burden to prove that he or she sustained losses due to the transaction on which he or she proceeded was on the basis of false or omitted information in the prospectus and furthered the extent of the damages suffered. By way of deviation from the general rule, restitution covers only actual damage suffered. The same principle applies with respect to mandatory public offerings under the provisions of Law 3461/2006.
In all other claims, the general rule applies, meaning that the investor has the onus to prove the illegal behaviour, the damage suffered and the causal link between the behaviour and the damage incurred (ie, fulfilment of the conditions of article 914 of the Greek Civil Code on tort liability).Other elements of claim
What elements present special issues in the securities litigation context?
No elements other than the ones stipulated in the answers above in practice present special issues in a securities litigation context.Limitation period
What is the relevant limitation period? When does it begin to run? Can it be extended or shortened?
The limitation period for claims arising out of invalid or omitted information from the prospectus is three years from the issuance of the prospectus.
For mandatory public offerings the limitation period of claims is three years from the end of the period of acceptance.
A claim for damages under tort provisions becomes time-barred five years after the date on which the party that suffered the damage became aware of the loss and of the person liable. In any case, a claim becomes time-barred 10 years after the occurrence of the event that caused the loss.
Partial payments of the claimed amount or the provision of security interrupt the limitation period since they constitute interruptive events. The same applies in the case of initiation of enforcement proceedings or filing of a claim with a court or arbitral tribunal.