Einde inhoudsopgave
Cross-border Enforcement of Listed Companies' Duties to Inform (IVOR nr. 87) 2012/4.3.1
4.3.1 Administrative proceedings
mr.drs. T.M.C. Arons, datum 07-05-2012
- Datum
07-05-2012
- Auteur
mr.drs. T.M.C. Arons
- JCDI
JCDI:ADS367230:1
- Vakgebied(en)
Ondernemingsrecht (V)
Voetnoten
Voetnoten
On the basis of s. L. 621-9-1 C.mon.fin., the AMF may carry out inspections and investigations in order to perform its public law duty to monitor the conformity of transactions which involve securities which are the subject of public offerings. In order to discover violation of ss 465-1 and 465-2 C.mon.fin., the AMF can request the presiding judge of the District Court (Tribunal de grande instance) of the place at which the premises to be inspected are located to grant authorisation to the AMF's Commission of investigators to conduct inspections at any place and to effect seizures of documents (s. L. 621-12 C mon fin )
It is noteworthy to mention that on the basis of s. R. 621-46 C.mon.fin. in conjunction with s. 431 FCCP the public prosecutor can join the court proceedings and make written statements on the case as well as make oral pleadings. Supreme Court (Commercial Chamber), 7 December 2010 (Frydman v AMF), Rev. soc. 2011 (5), p. 300 et seq. with commentary from Ch. Arsouze.
S. L. 621-1 C.mon.fm.
S. L. 621-15 II c in conjunction with s. L. 621-15 III c C.mon.fm. states that the fine imposed by the Disciplinary Committee (Commission des sanctions) of the AMF may not exceed EUR 100,000,000 or 10 times the amount of any profit realised by the defendant. All persons can be fined who, on the French territory or abroad, did, or tried to, disseminate false or misleading to the public. Besides the issuing company and its directors, the interral company's auditors qualify as 'all persons' as well. AMF Disciplinary Committee's decision of 21 November 2007 (Messrs. K. Ait Yala, D. Leveque, R. Mansouri and L. Zouary) Bull. Joly Bourse 2008 (2) § 15, p. 139 et seq. with commentary from S. Torck.
On the basis of s. 213-1 RG AMF, the AMF can suspend a public offer or admission to trading on a regulated market for no more than ten consecutive trading days each time that it has reasonable grounds to suspect that the transaction would contravene applicable laws and regulations.
Arsouze/Ledoux (2006), p. 399.
Letréguilly (2004), p. 453; Chvika (2008a), p.13; Chvika (2008b), p. 15.
ABC-case, Paris Court of Appeal, 26 June 2008.
S. 2224 FCC.
S. 2241 FCC.
Law No. 2008-561 of 17 June 2008.
Cf. Magnier (2011), p. 124.
Until 12 November 2004, this requirement was laid down in s. 2 of the repealed Rule No 98-07 of the former French Stock Exchange Committee (Règlement (COB) No 98-07). From 12 November 2004 until 20 January 2007, this requirement was laid down in s. 222-2 RG AMF.
Decision of the former French Stock Exchange Committee (COB) in the Welcom case, Bulletin COB No. 292 of June 1995; this decision was upheld by the Paris Court of Appeal in its judgment of 23 January 1996, Bulletin COB No. 299 of February 1996.
Maréchal (2001), p. 8.
S. 632-1 RG AMF. Note that by retaining the constitutive element that the misinformation is 'knowingly' (sciemment) disseminated, intention on part of the defendant remains to be required in order to establish liability. Stasiak (2007), para. 48.
In its Decision of 20 May 2010, the AMF's Disciplinary Committee ruled that the issuing company can only be prosecuted on the basis of s. 223-1 RG AMF and not on the basis of s. 632-1 RG AMF. Until that moment, French scholars interpreted the term 'all persons' as encompassing the issuer as well as natural persons. Bonneau/Drummond (2010), para. 520; Couret et al. (2008), para. 1585.
Bonneau/Drummond (2010), para. 436-2; Decision of the AMF's Disciplinary Committee, 5 July 2007 (Marionnaud parfumeries, KPMG SA, Cofirec et al.v AMF) Bull. Joly Bourse 2008 (1), § 5, p. 46 et seq. with commentary from É. Dezeuze and G. Buge. Paris Court of Appeal, 20 May 2008 (Rhodia SA et al. v AMF) Bull. Joly Bourse 2008 (12), § 61, p. 492 et seq. with commentary from H. Bouthinon-Dumas. The Court of Appeal's judgment was upheld by the French Supreme Court (Commercial Chamber)'s judgment of 7 July 2009. The Supreme Court ruled that: Ic]onsidering that informing the market correctly and fairly requires that the different components of the company's total debt, including the off-balance debt, should be communicated to the public in such a manner that it is able to evaluate the financial situation of the company, the Court of Appeal ruled that Rhodia's communication was in this respect defective and it also held that it is of no importance for the qualification of this infringement that Rhodia never dissimulated that the numbers communicated concerned merely net debt, therefore the investors were presented an incomplete picture of the company's financial situation; given the factual circumstances the Court of Appeal was right to rule that Rhodia infringed s. 632-1 RG AMF.' Bull. Joly Bourse 2009 (6) § 69, p. 472 et seq.) Regarding the liability of the company's director, the Supreme Court (7 July 2009, No. 08-17541 Bull. Joly Bourse 2009 (6) § 70, p. 475 et seq. with commentary from H. Bouthinon-Dumas) also upheld the Court of Appeal's judgment. Unfortunately, the Supreme Court did not consider the director's argument that in cases like the one at hand a company's director should not be held to know the false or misleading nature of information if the latter nature is derived from an omission to communicate information which is not required to be communicated by any norm or regulation, because this argument was not brought forward to the Court of Appeal.
Like under the regime of s. 3 of the repealed Rule No. 98-07 of the fomier French Stock Exchange Committee, there is a distinction between disclosure (communication) or dissemination (dision) of false information. The fomier emanates from the issuing company, i.e. first-hand information, while the latter is information disseminated by a third party, second-hand information. Regarding the first-hand information intention is not required, however, in order to be liable for disseminating false information, there must be evidence that the defendant knew that the information was false. Segain/Delpech (2010), p. 58 referring to the Decision of the AMF's Disciplinary Committee, 17 December 2009 (Sociétés Les Laboratoires Arkopharma et Imarko and Mr. Max Rombi).
Decision of the AMF's Disciplinary Committee, 10 December 2009, Rev. soc. 2010 (4), p. 262 et seq.
Clermontel (2009), para. 544.
French Supreme Court (Commercial Chamber) ruled that the administrative proceedings are of a criminal law nature in the sense of art. 6 ECHR such that the director can be directly sanctioned as author of acts that are incriminated expressly in the regulations applicable. Judgment of 31 March 2004 (Kalisto) RD bancaire et fin. 2004 (4) § 185, p. 268 et seq. with commentary from H. Le Nabasque; Bull. Joly Bourse 2004 (4) § 88, p. 460 et seq. with commentary from J.-J. Daigre; BanqueD 2004 (96), p. 38 et seq. with commentary from H. de Vauplane and J.-J. Daigre. The same holds for criminal proceedings, French Supreme Court (Criminal Chamber), 10 February 2009, Bull. Joly Soc. 2009 (5) § 99, p. 499 et seq. with commentary from S. Messaï-Bahri.
Mattout (2004), p. 458.
Paris Court of Appeal, 7 October 2008, Le Coadon case, Rapport annuel AMF 2008, p. 233 et seq.
The AMF, which has wide powers of investigation,1 often starts investigations into the trading of listed securities when its share price is subject to significant fluctuations without any apparent reason. When the price of recently listed securities starts to fall as a result of the revelation that the information contained in the prospectus was false or misleading, the AMF may take notice of this (significant) price correction and start an investigation on the nature of this particular price correction.
Before analysing the sub stantive administrative provisions regarding the liability of the persons responsible for the prospectus, it has to be mentioned that the AMF proceedings do not involve any private claimants or concern their losses.2 The AMF needs to protect the general interest of a well-functioning securities market.3 Therefore, the AMF has no authority to sanction the violator unless the abstract securities market has been affected by the alleged dissemination of false or misleading information. The sanctions that the AMF can impose are limited to fines4 and other administrative sanctions like an order for suspension of trading.5 However, in these administrative proceedings damages cannot be awarded to the investors who suffered a loss as a result of the false or misleading information.
The investors have the option to claim damages in civil court proceedings after the AMF sanctioned X S.A. and/or its directors for the publication and dissemination of false and misleading information.6 The AMF's decision, possibly affirmed by the administrative court, could be supportive to investors claiming that the information contained in the prospectus is false and misleading.7 However, this research identified only one case where this situation appears to have occurred and this case did not even lead to a judgment requiring the payment of damages.8 Given the fact that the statutory limitation period for damage claims is five years,9 it is important that the investors or an investor association interrupts the limitation period by bringing a claim against the defendant.10 Unlike in Dutch law, French law, which has been reformed in regard to limitation periods in 2008,11 does not allow interruption by written notice to the obligor that the oblige reserves his right to performance of the obligation. The absence of this possibility to interrupt seriously jeopardises the possibility of investors to postpone their claims until after the outcome of administrative proceedings by the AMF or criminal proceedings by the public prosecutor.12
Section 223-1 of the General Regulation of the AMF13 prescribes that the information provided to the public (in a prospectus) must be accurate and precise and presented fairly. This requirement entails that necessary information cannot be omitted; there is a duty to disclose all significant information such that the public benefits from information that is accurate, precise and presented fairly.14 A fair presentation consists of informing the public about the positive as well as the negative aspects of the company. The risks must be assessed reasonably.15
The Regulation also forbids publication of misinformation: all persons must refrain from disclosing or knowingly (sciemment) disseminating information, regardless of the medium, that gives or may give false, imprecise or misleading signals with respect to securities.16 It specifically forbids the dissemination of rumours and false or misleading information where the persons making the dissemination knew or ought to have known that the information was false or misleading.17
These administrative rules provide for a strict liability regime. The strict liability regime is applicable to the issuer X S.A. and its executive and non-executive directors alike.18 The AMF does not have to prove that X S.A. had the intention to disclose false or misleading information.19 The issuing company can be administratively sanctioned for the dissemination of information by its directors. In fact, the director acts in the name of and at the expense of (en son nom et pour son compte) the issuing company.20 In order to be able to impose sanctions on the director personally, the AMF, however, needs to demonstrate that the director knew or should have known that the information was false or misleading. The AMF does not have to prove intention to disseminate false information on the part of the defendant.21 The defendant is liable if he should have known that the information was false or misleading. Unlike in private law claims against a company's director, the AMF does not have to prove that the director acted outside the normal performance of his duties.22 This feature and the high penalties with an upper limit of EUR 100,000,000 will probably make the administrative proceedings the most effective deterrent against director's misbehaviour.23
It is noteworthy that the Paris Court of Appeal (Cour d'appel de Paris) recently rejected the appeal against a decision where the AMF sanctioned the Chief Executive Officer (Président-Directeur-Général, PDG) of a public limited company (Société Anonyme, S.A.) for dissemination of misleading information despite the fact that he had previously delegated all his powers and responsibility in respect of the company 's financial communication to another executive director (directeur) of the company.24