On 23 December 2009 the European Court of Justice (ECJ) gave judgment in the case of Spector Photo Group NV & Chris Van Raemdonck on the meaning of ‘use of inside information’ for the purposes of Article 2(1) Market Abuse Directive (Directive 2003/6/EC) (MAD).

The case concerned a Belgian quoted company which, on a number of occasions in 2003, purchased its own shares in the market so as to implement a stock option programme for employees. After two such purchases the company published certain information concerning its results and its commercial policy and the company’s share price rose. The Belgian national authority classed the two purchases as insider dealing under Belgian legislation and fined both the company and one of its managers who placed the purchase orders. They appealed and the Belgian court referred certain questions to the ECJ.

Article 2(1) MAD prohibits any person who “possesses inside information from using that information” to acquire or dispose of financial instruments, either directly or indirectly, to which the information relates. It does not state whether the primary insider must have intended to use inside information when he entered into the transaction or acted deliberately or negligently and it does not expressly state whether it must be established that the inside information was decisive in the decision to enter into the market transaction, or whether the primary insider had to be aware that he was in possession of inside information.

The ECJ held that the fact that a primary insider who holds inside information trades on the market in financial instruments to which that information relates implies that that person has ‘used inside information’ within the meaning of Article 2(1) MAD. This is without prejudice to the rights of the defendant and the right to be able to rebut that presumption. However, the question of whether the primary insider has used the information within the meaning of Article 2(1) MAD needs to be determined in light of the purpose of MAD, which is to protect the financial integrity of the financial markets and enhance investor confidence.

(Spector Photo Group NV & Chris Van Raemdonck (Approximation of Laws) [2009] EUECJ C-45/08, 23.12.09)