A judgment will give journalists more legal certainty in their research in the future.
(Photo: dpa)
Frankfurt Journalists who report on listed companies sometimes tread on thin ice from a legal point of view. Because during their research they sometimes come across new information, the publication of which affects share prices. Anyone who uses such insider information and places orders for securities in order to benefit from price developments is liable to prosecution for “insider trading”. This is uniformly regulated in Europe.
It is also forbidden to pass on insider information to another person without authorization, to induce him to trade a security on the basis of insider information or to give him a corresponding recommendation. In practice, the ban on passing on information in particular makes further research to verify the information very delicate. The European Court of Justice (ECJ) ruled on Tuesday that there are certain exceptions for journalists as part of their research (Ref.: C-302/20).
The highest European court dealt with insider trading proceedings from France. One journalist, although not involved in any illegal business himself, was fined for insider trading for sharing certain information. The journalist defended himself against this and referred to his freedom of the press. The Court of Appeal in Paris now turned to the ECJ.
The journalist had published two articles on the website of the British newspaper “Daily Mail” in which he addressed market rumors about the launch of public bids for the shares of Hermès (by LVMH) and Maurel & Prom. In his texts, he cited prices that were significantly higher than the prices of these shares on the Euronext stock exchanges. The publication caused the prices of these stocks to rise significantly.
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Shortly before the articles were published, some UK-based financial analysts stocked up on the papers in question and sold them at a profit immediately after publication. The French Financial Markets Authority fined the journalist €40,000 for leaking the forthcoming publication of the articles to these people, thereby disclosing “inside information” to them.
ECJ: Freedom of the press can justify disclosure of information
The German Press Council has recommended in its publication “Journalistic Codes of Conduct and Recommendations of the German Press Council on Economic and Financial Market Reporting”: “Journalists are not allowed to share insider information with anyone else or make it accessible.” This applies to the research stage.
The Press Council continues: “However, this does not mean the journalistic publication of insider information, which is part of the journalist’s job and is permissible.”
Now the ECJ conceded that disclosure of information during the search can be lawful. According to the ECJ, information about the forthcoming publication of a press article that takes up a market rumor may well constitute “precise” information and therefore fall under the term “insider information”. To do this, it must include, among other things, the price to be paid for these securities, the name of the author and the press organ publishing the article.
At the same time, the Court emphasized that the disclosure of inside information for journalistic purposes can be justified under EU law in the context of freedom of the press and freedom of expression.
“Journalistic purposes may include investigative activities carried out by a journalist prior to publication in order to verify the truthfulness of the rumours,” the ECJ said in a statement.
However, the judges recognized that the disclosure of inside information by a journalist is lawful only if it is necessary for the exercise of his profession and respects the principle of proportionality. The Court of Appeal in Paris must now examine this.
The German Press Council had not commented on the consequences of the judgment at the time of going to press.
High penalties for insider trading
Insider trading is not a trivial offense. Financial regulators have their own trading surveillance departments. Banks must report suspicious transactions. Anyone who uses insider information on the stock exchange for their own purposes must expect high penalties.
Recently, two cases made headlines. The Frankfurt Regional Court sentenced a fund manager from the fund company Union Investment and a banker from the US investment bank Lazar to heavy fines and more than three years in prison.
More: Highest sentence to date for insider trading: court sentences defendant to three years and eight months in prison