Cross-border Enforcement of Listed Companies' Duties to Inform (IVOR nr. 87) 2012/4.7.3.1:4.7.3.1 Transactional causation

Cross-border Enforcement of Listed Companies' Duties to Inform (IVOR nr. 87) 2012/4.7.3.1

4.7.3.1 Transactional causation

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

In the Pfeiffer v SA Eurodirect Marketing case, the Colmar Court of Appeal ruled that the losses incurred by the claimant, Mr Pfeiffer, when he sold the shares he acquired after the publication of a misleading business result forecast by the defendant company were causally linked to this publication.1 The court computed the losses as the difference between the price of acquisition and the (lower) price at which he sold his shares. The French Supreme Court2 upheld this ruling:

Whereas by ruling, without reference to tables allegedly (alleged by Eurodirect Marketing to be, TMCA) misrepresented (by Pfeiffer), that in the 3 months after the (misleading, TMCA) press release of 7 April 1998, Mr Pfeiffer made regular purchases of shares in Eurodirect Marketing for an amount largely above the level of previous purchases, and with notice to the fact that he (Mr Pfeiffer, TMCA) made the effort to request the company to send him the reference document on the year 1997 in order to verify the information published in April 1998 before the general shareholders meeting, thus demonstrating his (Mr Pfeiffer's, TMCA) interest in the information published in the press release of April, the Court of Appeal could rule that there was a causal link between the torts committed by the company and the loss sustained by Mr Pfeiffer in selling his shares, which he would not have acquired if he had not been the victim of misleading information, at a loss.'

As a consequence of the fact that he could prove transactional causation, Mr Pfeiffer was awarded the difference between the price for which he purchased the shares in the company and the price at which he sold his shares after the revelation of the misleading nature of the business results.3 If the investor proves that he based his investment decision on false or misleading information in such a way that he would not have acquired the securities at all (and he did not sell, unlike Pfeiffer, his securities) the court can order the repayment of the share price paid in return for the issuer 's shares.4

It is difficult for the investor to provide evidence for his claim that he would not have acquired the securities if the correct information was published in the prospectus. In that case, he needs to prove transaction causation and give evidence for the fact that he based his investment decision on the information provided in the prospectus. Only in very specific circumstances as in the Pfeiffer v SA Eurodirect Marketing case where Pfeiffer could demonstrate that he actually based his investment decision to buy more shares in the company on the press release because he requested the company's annual accounts of 1997 in order to make a comparison with the information in the business forecast, the claim for the difference between the purchase price and the sale price of the securities will be awarded. In a more generic case, an investor can hardly prove that he acquired (more) shares in the company on the basis of the information contained in the prospectus, because usually investors do not request the company to send him the prospectus.

Concluding, onder certain conditions, the claimant's burden to prove that he acquired the securities on the basis of the publication of misleading and false information may not be too difficult. However, the circumstances in the Pfeiffer v SA Eurodirect Marketing case were very specific.

Deze functie is alleen te gebruiken als je bent ingelogd.