The EU Court creates confusion as to when inside information has been made public

The case was brought to the EU Court by the Swedish Supreme Court, asking the EU Court to consider whether necessary for public disclosure to have taken place in the manner referred to in Article 17 of MAR in order for information to be considered to have been made public in accordance with Article 7(1)(a) of MAR.

The case relates to insider trading in Hybricon Bus Systems AB (Hybricon), which had delivered a tender for the sale of electric buses and charging stations to Umeå kommunföretag AB (Umeå). The contract was not awarded to Hybricon but to another tenderer.

By an email sent by Umeå, the 5 interested companies and 22 other persons who had expressed interest in following the procedure without participating were informed of the outcome of the call for tenders. The recipient in Hybricon sent a message to person A recommending that he sell his shares in Hybricon. Person A in turn, passed the same recommendation on to person B, who also owned shares. Both person A and person B sold shares in Hybricon before the information about the failed tender was published by Hybricon, thus limiting their losses following the sale of the shares.

The EU Court did not assess the facts of the case in detail but indicated that a direct communication stating the outcome of a tendering procedure to a limited circle of recipients does not constitute non-discriminatory disclosure to any investor potentially interested in that outcome. The fact that the information contained was accessible to the public and that any interested person could request the competent authority to grant access thereto does not mean that it ceases to be inside information. Thus, such non-public communication of information to participants in a tender process may cause the recipients to become insiders if one or more listed companies are part of the process.

On the specific question raised by the Swedish Supreme court the EU Court concluded as follows:

"Article 7(1)(a) of … [MAR] must be interpreted as meaning that in order for information to be considered to have been made public and thereby to have ceased being ‘inside information’ within the meaning of that provision, it is necessary for public disclosure to have taken place in the manner and in compliance with the requirements laid down in Article 17 of that regulation and Article 2(1) of Commission Implementing Regulation (EU) 2016/1055 of 29 June 2016 …"

The EU Court acknowledges that Article 7 does not expressly refer to the procedures of Article 17 when deciding whether inside information has been made public. The EU Court emphasised however to the need for uniform application of EU law and the principle of equality, leading to the conclusion that the term has been made public should be given an autonomous and uniform interpretation throughout the EU.

The EU Court does, however, not distinguish between inside information sourced from or related to the listed company and inside information sourced from or related to third parties affecting the trading price of the listed company. The latter could for instance be information such as a tender offer, research reports, information about a license being granted to a competitor etc. The EU Court does not discuss how such third-party information not ever made public by the listed company should be cleansed in the market.

Furthermore, the EU Court does not discuss situations where information sourced from or directly related to the listed company has clearly come into the public domain otherwise than through an Article 17 disclosure, for instance press statements from government bodies regarding granting of licenses or dawn raids, fire, explosions, terrorist attacks etc. being subject to broad media coverage.

Taken literally, the implication of the EU Court's decision is that investors would be prevented from trading based on information as set out in the preceding paragraph pending the listed company submitting a disclosure pursuant to Article 17 of MAR. This would raise the issue whether the financial instrument in question in the meantime would have to be suspended from trading.

It is also worth noting that the EU Court's judgement is different from the position taken in the ESMA Q&A (page 21), where inside information is defined as information that has not been made public "regardless of whom has published the information or by which means".[2]

It remains to be seen how the Swedish Supreme Court will handle the case following the EU Court judgement.

[1] https://infocuria.curia.europa.eu/tabs/document/C/2024/C-0229-24-00000000RP-01-P-01/ARRET/319279-EN-1-html
[2] ESMA70-145-111 Q&As on MAR