Provisional text
OPINION OF ADVOCATE GENERAL
CAMPOS SÁNCHEZ-BORDONA
delivered on 22 January 2026 (1)
Case C‑773/24
A.
intervener:
Lietuvos bankas
(Request
for a preliminary ruling from the Lietuvos vyriausiasis administracinis teismas (Supreme Administrative Court of Lithuania)
( Preliminary-ruling proceedings – Single market for financial services – Market abuse – Regulation (EU) No 596/2014 – Concept of inside information – Insider dealing – Presumption of insider dealing where inside information is held – Reversal of the presumption in the case of legitimate forms of financial activity – Legitimate activities of investment firms (brokers) in the normal course of their profession – Practice of ‘front-running’ – Market participants’ own plans and strategies for trading – Duty of investment firms to notify orders to buy or sell securities which are suspected of using inside information )
1.        The issue in the dispute which gave rise to this reference for a preliminary ruling is the lawfulness of a penalty, imposed by Lietuvos bankas (Bank of Lithuania) on a credit institution which provides financial and investment services, for insider dealing within the meaning of Article 14(a) of Regulation No 596/2014. (2)
2.        The particular feature of the case is that the credit institution on which the penalty was imposed executed orders to sell financial instruments (shares) exactly as indicated in those instructions by a client, who would set the price of the transactions. The Bank of Lithuania took the view that the price of the shares sold under those conditions constituted inside information in accordance with Article 7 of Regulation No 596/2014.
3.        In its reply to the referring court, the Court of Justice will have to examine the relationship between two provisions of Regulation No 596/2014:
–        First, Article 8(1), which defines the term ‘insider dealing’. That term encompasses conduct by a person who possesses inside information and uses that information by trading, for its own account or for the account of a third party, financial instruments to which that information relates.
–        Secondly, Article 9(2)(b), which, under the heading ‘Legitimate behaviour’, lays down special rules applicable to legal persons which are authorised to execute orders on behalf of third parties, where the acquisition or disposal of financial instruments to which the order relates is carried out ‘legitimately in the normal course of the exercise of that person’s [duties]’.
I.      Legal framework. European Union law: Regulation No 596/2014
4.        Recitals 23, 24, 26, 29, 30, 31 and 54 are relevant to this case.
5.        In particular, recital 24 states:
‘Where a legal or natural person in possession of inside information acquires or disposes of, or attempts to acquire or dispose of, for his own account or for the account of a third party, directly or indirectly, financial instruments to which that information relates, it should be implied that that person has used that information. That presumption is without prejudice to the rights of the defence. The question whether a person has infringed the prohibition on insider dealing or has attempted to commit insider dealing should be analysed in the light of the purpose of this Regulation, which is to protect the integrity of the financial market and to enhance investor confidence, which is based, in turn, on the assurance that investors will be placed on an equal footing and protected from the misuse of inside information.’
6.        In accordance with Article 7 (‘Inside information’):
‘1.      For the purposes of this Regulation, inside information shall comprise the following types of information:
(a)      information of a precise nature, which has not been made public, relating, directly or indirectly, to one or more issuers or to one or more financial instruments, and which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments or on the price of related derivative financial instruments;
…
(d)      for persons charged with the execution of orders concerning financial instruments, it also means information conveyed by a client and relating to the client’s pending orders in financial instruments, which is of a precise nature, relating, directly or indirectly, to one or more issuers or to one or more financial instruments, and which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments …
…’
7.        Article 8 (‘Insider dealing’) reads:
‘1.      For the purposes of this Regulation, insider dealing arises where a person possesses inside information and uses that information by acquiring or disposing of, for its own account or for the account of a third party, directly or indirectly, financial instruments to which that information relates …
…
4.      This Article applies to any person who possesses inside information as a result of:
…
c)      having access to the information through the exercise of an employment, profession or duties; or
…
This Article also applies to any person who possesses inside information under circumstances other than those referred to in the first subparagraph where that person knows or ought to know that it is inside information.
…’
8.        Article 9 (‘Legitimate behaviour’) provides:
‘…
2.      For the purposes of Articles 8 and 14, it shall not be deemed from the mere fact that a person is in possession of inside information that that person has used that information and has thus engaged in insider dealing on the basis of an acquisition or disposal where that person:
…
b)      is authorised to execute orders on behalf of third parties, and the acquisition or disposal of financial instruments to which the order relates, is made to carry out such an order legitimately in the normal course of the exercise of that person’s employment, profession or duties.
…
6.      Notwithstanding paragraphs 1 to 5 of this Article, an infringement of the prohibition of insider dealing set out in Article 14 may still be deemed to have occurred if the competent authority establishes that there was an illegitimate reason for the orders to trade, transactions or behaviours concerned.’
II.    The facts, the dispute and the questions referred for a preliminary ruling
9.        The summary of the facts which I shall set out below reflects the corresponding paragraphs of the order for reference.
10.      A. is a credit institution registered in Estonia, which is supervised by the Estonian financial supervisory authority. A. provides financial and investment services.
11.      C., a company which is registered in Luxembourg and is now wound up, held 3 700 874 shares in a public limited liability company (‘the issuing company’). Those shares represented 47.40% of the total share capital.
12.      On 30 October 2019, C. authorised a third party (‘the representative’) to act on its behalf. The authorisation included the right to take action in relation to the disposal of the shares in the
issuing company held by C., that is to say, to take decisions and carry out all acts in relation to the disposal of those shares at the representative’s own discretion and on the terms and conditions determined by the representative, including the right to decide whether the shares in the issuing company should be disposed of on or outside the regulated market.
13.      On 8 November 2019, A. and C. (the latter through its representative) signed a consultancy services agreement, on the basis of which A. undertook to arrange the disposal of some of the shares in the
issuing company held by C. by way of accelerated bookbuilding and placement of securities, (3) and to advise C. on matters relating to that process.
14.      On 18 November 2019, A. and C. (through its representative) also entered into an investment services agreement. On the basis of that agreement, A. executed orders placed by C. to dispose of shares in the issuing company on the regulated market by means of the automated execution of orders (‘automated transactions’).
15.      On 20 November 2019 at 18:03, the issuing company announced publicly (4) that it had received a notification from C. of its intention to dispose of some of the shares
(in the issuing company) by way of ABB. That announcement stated that C. intended to dispose of shares for EUR 5 million; the ABB would commence on 20 November 2019 and was expected to be completed two days later (C. could decide to accelerate the process and complete it earlier); and A. would act as lead underwriter.
16.      On 21 November 2019, that is to say, following that announcement, the price of shares in the
issuing company dropped by 11.72% and intense trade in its shares started: whereas 935 shares were traded on the regulated market on 20 November through automated transactions, 40 396 shares were traded on 21 November (an increase by a factor of 43.02 on the previous day) and 93 014 shares were traded on 22 November 2019.
17.      On 21 and 22 November 2019, employees of A. approached at least 13 potential investors regarding the disposal of the shares in the issuing company by way of ABB. From 21 November 2019, A., acting on behalf of C., communicated to potential investors that C., as the seller, was offering a price of EUR 4, which it considered to be acceptable. That price was significantly below the market price. (5)
18.      On 21 November 2019, at 16:44 and at 21:47, the first two offers were received in the ABB for the acquisition of 71 395 and 12 500 shares, respectively, in the issuing company at a price of EUR 4 per share.
19.      On 21 November 2019, at 23:03, C.’s representative asked A. by e-mail about the possibility of selling some of the shares on the market on 22 November 2019. The representative stated in its e-mail that there was a high turnover on the market on that day (at a variable price of EUR 5.1 to 5.9) and that it would be willing to dispose of shares if there was demand. The representative also enquired whether it was necessary to send any special order or whether the agreement between C. and A. would be sufficient. At 23:38 on the same day, A., in its reply by e-mail to the representative’s enquiry, asked in essence for a cap on the price and the number of shares to be disposed of on the regulated market.
20.      The account of the events of 22 November 2019 is as follows:
–        At 00:12, C.’s representative placed an initial order with A. to sell up to 50 000 shares in the issuing company through automated transactions at a price not lower than EUR 4 per share, while exercising due diligence on the market.
–        Between 10:00 and 15:59, A., in executing that order, sold a total of 48 874 shares in the issuing company on the regulated market at a weighted average price of EUR 5.04. (6)
–        At 11:36, C.’s representative asked A. by e-mail how many shares had been sold and whether the scope of the order should be increased. A. informed C.’s representative that 34 537 shares had been sold so far at a weighted average price of EUR 5.109 per share.
–        At 12:16, a third offer was received for the acquisition of 5 000 shares in the issuing company by way of ABB at a price of EUR 4 per share.
–        At 12:33, C.’s representative placed a second order with A. to dispose of up to an additional 50 000 of the shares in the issuing company through automated transactions at a price not lower than EUR 4 per share, while exercising due diligence on the market. That order was not executed on 22 November, as not all the shares from the first order had been sold.
–        At 14:17, A. informed C.’s representative that the orders placed had been executed, indicating that a total of 41 037 shares in the issuing company had been sold on the regulated market at a weighted average price of EUR 5.084 per share.
–        At 14:49, following the receipt of a final three offers for the acquisition of shares in the issuer by way of ABB at EUR 4 per share, A. notified C.’s representative of the results of the ABB: purchase orders (offers from investors) had been received for the acquisition of 904 745 shares (six offers in total) at EUR 4 per share. A. asked for a response with regard to the offers received (in other words, whether or not it should accept the offers).
–        At 16:06, C.’s representative notified A., by e-mail, that it was accepting the offers from investors for the acquisition of shares in the issuing company.
–        At 19:12, the issuing company made a public announcement via the Stock Exchange information system that C. had disposed of 904 745 of its shares by way of ABB at EUR 4 per share. During the trading session on 25 November 2019, the price of shares in the issuing company fell by 11.72% to EUR 4.22.
21.      Under the first and second orders referred to above, the remaining 51 126 shares in the issuing company were disposed of through automated transactions on 25 and 26 November 2019, that is to say, after the share disposal transactions by way of ABB had already been announced through the Stock Exchange information system.
22.      From 18 February 2020 to 5 March 2021, the Bank of Lithuania conducted an investigation into those transactions.
23.      On 10 February 2022, the Bank of Lithuania adopted a decision in which it declared, in essence, that: (1) until 22 November 2019 at 19:12, the exact price (EUR 4) of the shares in the issuing company disposed of by way of ABB constituted inside information within the meaning of Article 7 of Regulation No 596/2014; (2) at the time of execution of the order by C. to dispose of shares in the issuer on the regulated market too, A. was aware of that information; (3) A. used that information on behalf of and in the interests of C., obtaining an unfair advantage from it. Accordingly, the Bank of Lithuania found that A. had infringed the prohibition on insider dealing laid down in Article 14(a) of Regulation No 596/2014, and it therefore imposed a fine of EUR 200 000 on A.
24.      Also in that decision of 10 February 2022, the Bank of Lithuania explicitly stated that no examination had been carried out into whether C. had committed any infringement. In the Bank’s view, A.’s actions, that is to say, the execution on 22 November 2019 of the orders which C. had placed through its representative, amounted to a separate infringement of insider dealing.
25.      By judgment of 10 October 2022, the Vilniaus apygardos administracinis teismas (Regional Administrative Court, Vilnius, Lithuania) dismissed A.’s action challenging the lawfulness and validity of the decision of the Bank of Lithuania of 10 February 2022.
26.      A. appealed against the judgment at first instance to the Lietuvos vyriausiasis administracinis teismas (Supreme Administrative Court of Lithuania), which has referred the following questions to the Court of Justice for a preliminary ruling:
‘(1)      Must Article 9(2)(b) of [Regulation No 596/2014] be interpreted as meaning that the execution by an investment firm of an order to dispose of securities (shares) on the regulated market, placed by a client on the basis of a standard services agreement, may (not) be regarded as exceeding the normal course of the exercise of its duties merely because (i) it provides services to that client on the basis of another agreement in connection with the disposal of those securities (shares) outside the regulated market, and (ii) it is, as a result, in possession of inside information about the client’s intentions (what the client has determined) with regard to the price of the securities (shares) to be disposed of outside the regulated market?
(2)      Must Articles 8(1), 9(2)(b) and 14(a) of Regulation No 596/2014 be interpreted as meaning that the person referred to in Article 9(2)(b) of that regulation may (not) be found by the competent authority to have infringed the prohibition laid down in Article 14(a) thereof, where the person trades in securities on the basis of an agreement with a client for the sole purpose of executing that client’s order, irrespective of whether that client has placed that order on the basis of inside information within the meaning of Article 8(1) of that regulation?
(3)      Must Article 9(6) of Regulation No 596/2014 be interpreted as meaning that it is sufficient for the competent authority merely to rely on the presumption referred to in recital 24 of that regulation in order to establish that there was an illegitimate reason for the placing of an order by a client with an investment firm, as referred to in Article 9(2)(b) of that regulation, to dispose of securities (shares) on the regulated market, when ruling on whether the investment firm (the broker) has infringed Article 14(a) of that regulation?
(4)      Must Article 8(1) of Regulation No 596/2014 be interpreted as meaning that the restrictions laid down therein may (not) be applied to trading in the shares of the issuer on the regulated market at market price by a person who has a holding in the capital of the issuer, merely because that person has already (freely) decided on a specific, but not yet publicly announced, price for the shares of the issuer to be disposed of in a process outside the regulated market, the commencement of which and the expected completion of which have been made public?
(5)      Must recital 24, Article 8(1) and Article 14(a) of Regulation No 596/2014 be interpreted as meaning that, for the purposes of rebutting the presumption of market abuse under recital 24 of that regulation, (i) it is necessary for the person referred to in the second subparagraph of Article 8(4) of that regulation, which has executed, on the basis of an agreement, an order from a client to dispose of part of its securities (shares) on the regulated market, to demonstrate that its client, when placing the order, did not carry out any of the acts referred to in Article 8(1) thereof, or (ii) it is sufficient for that person to demonstrate that it executed the client’s order for a reason other than being in possession of inside information?’
III. Procedure before the Court of Justice
27.      The request for a preliminary ruling was received at the Registry of the Court of Justice on 11 November 2024.
28.      Written observations were lodged by A., the Greek, Lithuanian and Polish Governments, and the European Commission.
29.      At the hearing, held on 19 November 2025, oral argument was presented by A., the Greek and Lithuanian Governments, and the Commission.
IV.    Assessment
A.      Preliminary observations of the referring court
30.      After describing the events in the terms I have transcribed above, the referring court sets out a number of matters of fact and of law (7) which it is helpful to note.
31.      First, the referring court states that the ABB was publicly announced and the process was open, so that any interested person could have made an offer to acquire the shares. (8)
32.      Secondly, the referring court adds that, objectively, it is possible to consider that, between 10.00 and 15.59 on 22 November 2019 (that is to say, while A. was executing C.’s order to sell some of the shares on the regulated market), inside information existed to the effect that, ‘as could reasonably have been expected, C. was going to dispose of part of the shares of the [issuing company] by way of [ABB] outside the regulated market … at a price of EUR 4 per share’.
33.      According to the referring court:
–        In the light of the circumstances preceding the public announcement of the results of the ABB, it could reasonably be
assumed that, prior to the first order (placed on 22 November 2019 at 00:12) to sell some of the shares in the issuing company on the regulated market, C. was willing to dispose of some of the shares in question by way of ABB at EUR 4 per share, and there were no other objective circumstances that could have given rise to any reasonable doubt that the sale of the shares by way of ABB might not take place due to a change in the intentions or lack of willingness on the part of the seller (C.).
–        Accordingly, considering that information about C.’s intentions from the perspective of an independent person, it can be objectively presumed, on the basis of the evidence in the case file, that that information (the information about the specific price of the shares in the issuer which were intended to be disposed of by way of ABB) constituted inside information within the meaning of Article 7(1)(a) of Regulation No 596/2014.
–        There are also objective grounds for considering that A., inter alia, by executing the order placed on 22 November 2019, at 00:12, was aware of that (inside) information concerning the intentions of its client (C.) in the ABB (Article 7(1)(d) of Regulation No 596/2014).
34.      Thirdly, the referring court states that the Bank of Lithuania does not dispute (and the evidence in the present case does not call into question) A.’s claims that:
–        The shares in the issuing company were traded on the regulated market only on the initiative of C. (its representative), which means that A. did not propose that C. trade on the regulated market or induce it to do so.
–        In executing C.’s orders, A. acted in its capacity as an investment firm which supplied the services specified in paragraphs 1 and 2 of Section
A of Annex I to Directive 2014/65/EU, (9) pursuant to the agreement concluded with C.
–        A. did not seek or receive any other or additional benefit from the execution of C.’s orders beyond a standard commission.
–        It has not been established, and nor does the decision of the Bank of Lithuania find, that A., in the period at issue, traded the shares in the issuing company on the regulated market for its own benefit or for the benefit of third parties (other than C.), or that it induced other persons to trade in those securities.
35.      Fourthly, the referring court notes that the Bank of Lithuania did not rule on C.’s liability. It found that A. had infringed Article 14(a) of Regulation No 596/2014 essentially on the ground that it had acted for the benefit and in the interests of C. by providing C. with an unfair advantage in relation to the other participants in the regulated market, and that A., as a professional market participant, must have been aware of that unfair advantage gained by C.
B.      Questions 1, 2 and 3
36.      By these three questions, which may be considered together, the referring court seeks to ascertain the circumstances in which a person who is referred to in Article 9(2)(b) of Regulation No 596/2014 and who is authorised to execute orders to sell shares on behalf of third parties engages in insider dealing contrary to Article 14 of that regulation.
37.      The answer calls for an examination, first, of the relationship between a number of articles of Regulation No 596/2014, based on the assumption adopted by the referring court: the information held by A., concerning the price which the shareholder was willing to accept in the ABB, may be classified as inside information. The investors participating in the regulated market were unaware of that price. (10)
38.      In accordance with Article 8(1) and (4)(c), read in conjunction with Article 14, of Regulation No 596/2014, for insider dealing to exist, there must be both: (a) the possession of inside information, and (b) the use of that inside information in the circumstances laid down by Article 8 of Regulation No 596/2014.
39.      On a previous occasion, the Court inferred from the equivalent provisions of Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation (market abuse) (OJ 2003 L 96, p. 16) that:
–        ‘the prohibition on insider dealing applies where a primary insider who is in possession of inside information takes unfair advantage of the benefit gained from that information by entering into a market transaction in accordance with that information’; (11)
–        ‘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 “used that information” within the meaning of Article …, but without prejudice to the rights of the defence and, in particular, the right to be able to rebut that presumption’; (12)
–        ‘however, in order not to extend the scope of the prohibition laid down in Article … beyond what is appropriate and necessary to attain the goals pursued by that directive, certain situations may require a thorough examination of the factual circumstances enabling it to be ensured that the use of the inside information is actually unfair so as to be prohibited by the directive in the name of the integrity of financial markets and investor confidence.’ (13)
40.      The Spector rule and exemption are included in recital 24 of Regulation No 596/2014. (14) That regulation does not prohibit all use of inside information but rather only the use of such information in a manner which conflicts with its objectives, to which the Court has also referred. (15)
41.      The preamble (recitals 18, 29 and 30) to Directive 2003/6 provided ‘… several examples of situations in which the fact that a primary insider in possession of inside information enters into a transaction on the market should not in itself constitute “use of inside information” for the purposes of Article 2(1) of that directive’. (16)
42.      Those situations are now codified in Article 9 of Regulation No 596/2014. Certain transactions are permissible, even if they are carried out while in possession of inside information, provided that they do not go against the underlying purpose of the prohibition of insider dealing. (17) In other words, they are not regarded as ‘use’ of inside information. (18)
43.      The exceptions in Article 9 do not constitute an exhaustive list: an economic operator may show that it holds inside information but that it has not used that information in a manner that is incompatible with the aims of Regulation No 596/2014.
44.      In particular and in so far as is relevant to this case, Article 9(2)(b) of Regulation No 596/2014 provides that a person who is in possession of inside information will not be deemed to have used that information (and, therefore, to have engaged in insider dealing) where that person ‘is authorised to execute orders on behalf of third parties, and the acquisition or disposal of financial instruments to which the order relates, is made to carry out such an order legitimately in the normal course of the exercise of that person’s employment, profession or duties.’ (19)
45.      The exception laid down in Article 9(2)(b) of Regulation No 596/2014 (20) permits the absence of a causal link between the holding of inside information and the decision to execute an order in connection with shares. (21) The possession of inside information does not, in principle, influence the operations of an investment firm which does not obtain an advantage from holding that information. (22)
46.      Among the persons to whom the exception at issue applies are authorised credit institutions and investment firms pursuant to Directive 2014/65. (23) Where authorised credit institutions and investment firms execute orders to sell financial instruments on behalf of a client, they do not have as much latitude because the client’s instructions determine the executing undertaking’s conduct.
47.      The purpose of the exception laid down in Article 9(2)(b) of Regulation No 596/2014 is to enable credit institutions and investment firms to perform their professional activities even where they are in possession of inside information, something which is commonplace on account of their relationships with clients.
48.      That was the view the Court took in the light of recital 18 of Directive 2003/6: (24) ‘… the automatic application of those criteria to certain professionals in the financial markets, who are required to hold inside information relating to transactions carried out on the market by third parties, risks leading to a situation in which such persons are prohibited from carrying out their activity, an activity which is both legitimate and useful for the efficient functioning of the financial markets …’ (25)
49.      There is therefore an adjustment with regard to the application of Article 8 of Regulation No 596/2014. Whilst, in principle, the burden of proving that inside information has not been used lies with the person who holds that information, that is not so in the case of credit institutions and investment firms.
50.      Article 9 of Regulation No 596/2014 reverses the burden of proof, defining a number of cases in which the general rule laid down in Article 8 of the regulation does not apply. Pursuant to Article 9(1) to (5), there is a presumption that operators hold inside information but do not use it, and therefore do not carry out prohibited transactions. (26)
51.      Article 9(6) of Regulation No 596/2014 provides that, ‘notwithstanding paragraphs 1 to 5 of this Article, an infringement of the prohibition of insider dealing … may still be deemed to have occurred if the competent authority establishes that there was an illegitimate reason for the orders to trade, transactions or behaviours concerned.’
52.      The provision allocates the burden of proof to the competent authority in the matter. It is that authority which must show that the investment firm concerned has carried out an unlawful activity using inside information. It is not sufficient for that authority simply to rely on Article 8(1) and recital 24 of Regulation No 596/2014.
53.      As I have already pointed out, the exception laid down in Article 9(2) of Regulation No 596/2014 applies where ‘the acquisition or disposal of financial instruments to which the order relates, is made to carry out such an order legitimately in the normal course of the exercise of that person’s employment, profession or duties’.
54.      The examination of whether the manner in which the acquisition or disposal of financial instruments ordered by a client was carried out legitimately must be conducted on a case-by-case basis. Since the referring court is in possession of all the evidence regarding the investment firm’s conduct, it is best placed to perform that examination.
55.      However, the Court may provide the referring court with certain guidance for the purposes of its analysis of the present dispute.
56.      The first assessment criterion relates to the conduct of the ABB and the price of the shares in the course of that procedure. Usually, an ABB is carried out between the close of trading in shares on the regulated market and the opening of the next trading session, to avoid excessive price fluctuations and induced market volatility. The price is generally set when offers close and in the light of the characteristics of investors and the level of demand. Since it tends to be qualified investors who participate in an ABB and acquire significant packages of shares, those investors normally purchase at a somewhat lower price than that on the regulated market.
57.      In this case, A. provided an investment service included in Section A of Annex I to Directive 2014/65 (27) in the course of a procedure (the ABB) the operation of which is not covered by any specific provisions of EU law.
58.      An ABB aimed solely at qualified investors is likely to create a risk of unequal treatment between those investors and small investors who are active primarily on the regulated market. (28) In those cases, investment firms must scrupulously fulfil the obligations laid down in Articles 23, 24 and 27 of Directive 2014/65. (29)
59.      As the Commission stated at the hearing, failure to comply with those obligations means that an investment firm no longer benefits from the presumption that its conduct is legal where it holds inside information and does not execute an order to purchase shares ‘legitimately in the normal course of the exercise of that person’s … duties’ (Article 9(2)(b) of Regulation No 596/2014).
60.      In this case, the conduct of the ABB (30) and the setting of the share price are characterised by unusual circumstances:
–        The ABB was carried out over two days and in parallel with the sale of shares on the regulated market. The simultaneity of the two procedures, although not prohibited by any European Union provision, creates the risk of speculative sales of shares and may be prejudicial to small investors who buy shares on the regulated market.
–        The same investment firm (A.) was involved simultaneously in the sale of shares on the regulated market and in the ABB. As a number of parties pointed out at the hearing, the involvement of one or more other firm or firms in both procedures may have been an effective measure to prevent the use of the inside information held by A.
–        According to the information in the case file, the price of the shares in the ABB was set in advance by the seller and was known by A. (in the referring court’s view, this was inside information). However, everything suggests that the candidates to purchase shares in the ABB submitted offers to acquire shares at exactly that price. If that is the case, A. would not have had to set the sale price of the shares upon closure of the ABB on the basis of offers received.
61.      In any event, as was explained at the hearing, A. was not penalised for failure to comply with the obligations laid down in Directive 2014/65 (that is to say, its professional obligations as a firm providing investment services).
62.      The second assessment criterion is the interaction between A. and the client C. when it came to deciding that the shares would be sold in the ABB and, simultaneously, on the regulated market. It is not clear that the investment firm induced or recommended the simultaneous dual sale to that client: the referring court states that the shares in the issuing company were traded on the regulated market solely on C.’s (its representative’s) initiative, which means that A. neither proposed that C. trade on the regulated market nor induced it to do so.
63.      The third relevant criterion concerns the conditions for proceeding to the sale of shares, laid down in C.’s agreements with A. The referring court makes the assumption that, in this case, the information about the price of the shares which were to be disposed of by way of an ABB constituted inside information, within the meaning of Article 7(1)(a) of Regulation No 596/2014. The referring court states that A., when executing C.’s orders in its capacity as an investment firm, did so in accordance with the conditions of the agreement concluded with the client.
64.      The fourth criterion to consider is whether the investment firm accused of the infringement laid down in Article 14(a) of Regulation No 596/2014 obtained a benefit. As I stated above, the referring court categorically states that A. did not seek or receive any other or additional benefit from the execution of C.’s orders beyond a standard commission. (31)
65.      To my mind, that fact is of particular importance for the purpose of determining whether A. breached the prohibition of insider dealing.
66.      If A. did not trade the shares on the regulated market for its own benefit or for the benefit of third parties (other than C.), or induce other persons to trade those shares, I hardly see how it can be accused, as the perpetrator of the infringement, of carrying out an illegal transaction which requires that a person ‘[take] unfair advantage of the benefit gained from that [inside] information’. (32)
67.      Where an investment firm merely executes a client’s orders and, despite holding inside information, carries out the execution of orders to sell in accordance with the client’s instructions, there is, in fact, no link between that information and the broker’s conduct. The order to sell would have been executed in the same way if the investment firm had not been in possession of the inside information.
68.      The infringement laid down in Article 14(a) of Regulation No 596/2014 (engagement in insider dealing) requires that the perpetrator must receive or seek a specific benefit (an advantage) which, in the case of an investment firm, is not the same as mere remuneration, by way of standard commission, for the services which it provides to its client.
69.      In the light of the foregoing considerations, I believe that Article 9(2)(b) of Regulation No 596/2014 must be interpreted as meaning that:
–        An investment firm which executes orders to sell securities on the regulated market, placed by a client under a standard services agreement, and, simultaneously, organises for that same client an accelerated bookbuilding and placement of securities procedure does not engage in insider dealing unless the supervisory authority shows that: (a) that firm held inside information concerning the client’s intentions with regard to the price of the securities which were to be disposed of outside the regulated market; and (b) that firm’s conduct did not meet the applicable professional standards.
–        If the conditions laid down in Article 9(2)(b) of Regulation No 596/2014 are met, it cannot be presumed that the investment firm [infringed] the prohibition laid down in Article 14(a) of that regulation, unless the competent national authority, in accordance with Article 9(6) of Regulation No 596/2014, establishes that there was an illegitimate reason to comply with the order to sell.
C.      Question 4
70.      The referring court asks the Court of Justice to interpret Article 8(1) of Regulation No 596/2014, which defines the term ‘insider dealing’.
71.      The interpretation of Article 8(1) of Regulation No 596/2014 is sought in order to ascertain whether ‘the restrictions laid down therein may (not) be applied to trading in the shares of the issuer on the regulated market at market price by a person who has a holding in the capital of the issuer, merely because that person has already (freely) decided on a specific, but not yet publicly announced, price for the shares of the issuer to be disposed of in a process outside the regulated market, the commencement of which and the expected completion of which have been made public’.
72.      In short, the matter to be established is whether a holder of shares in the issuing company who tasks an investment firm with the sale of those shares engages in insider dealing within the meaning of Article 8(1) of Regulation No 596/2014.
73.      The Greek and Lithuanian Governments have argued that this question is not necessary for the purpose of adjudicating on the main proceedings and must, therefore, be ruled inadmissible. I agree with them.
74.      It follows from the order for reference that the Lithuanian supervisory authority penalised only the investment firm’s conduct as insider dealing but not the conduct of the shareholder (company C.) which ordered the investment firm to sell its shares. (33)
75.      Therefore, the issue to be decided in the main proceedings is not the conduct of the client shareholder but that of the investment firm which acted as a broker by selling those shares on the regulated market and by means of ABB.
76.      If the question is admissible, I agree with the referring court (34) that Article 8 of Regulation No 596/2014 does not apply to a holder of shares in an issuing company which decides to sell those shares in the circumstances at issue.
77.      Although C. held part of the issuer’s share capital (and, for that reason, possibly held inside information), (35) it did not acquire the information at issue in its capacity as a shareholder. In fact, the issuing company was not even aware of that information, (36) since it related only to C.’s wish to dispose of its shares, in other words, only to its own investment decisions. (37)
78.      A shareholder’s intentions as regards an acceptable price for shares which it wishes to dispose of, where that price is determined solely on the basis of its own wishes and personal decision, cannot be regarded as the possession of inside information for the purposes of the second subparagraph of Article 8(4) of Regulation No 596/2014. (38)
79.      It is apparent from recitals 31 (39) and 54 (40) of Regulation No 596/2014 that both the holder’s decision to dispose of the shares, which presumably included the decision regarding the acceptable price, and the holder’s actions based on its own plans and strategies for trading should not be regarded as the use of inside information.
80.      Accordingly, given that C. is not a third party vis-à-vis the information at issue, its decision to dispose of some of the shares on the regulated market at the market price, together with the decision also to dispose of the shares at a specified price by means of an ABB, does not constitute insider dealing for the purposes of Article 8(1) of Regulation No 596/2014.
D.      Question 5
81.      The referring court asks whether recital 24 and Article 8(1) and Article 14(a) of Regulation No 596/2014 may be interpreted as meaning that, for the purposes of rebutting the presumption to which that recital refers,
–        ‘… it is necessary for the person referred to in the second subparagraph of Article 8(4) of that regulation, which has executed, on the basis of an agreement, an order from a client to dispose of part of its securities (shares) on the regulated market, to demonstrate that its client, when placing the order, did not carry out any of the acts referred to in Article 8(1) thereof, or
–        … it is sufficient for that person to demonstrate that it executed the client’s order for a reason other than being in possession of inside information’.
82.      As I pointed out above, recital 24 of Regulation No 596/2014 creates a presumption that insider dealing (within the meaning of Article 8(1) of that regulation) is carried out by operators which are in possession of such information while it is inside information.
83.      I also explained how Article 9(2)(b) of Regulation No 596/2014 reverses the presumption where brokers execute orders to sell shares for the benefit of their clients, provided that they are acting ‘legitimately in the normal course of the exercise of that person’s employment, profession or duties’.
84.      On that basis, an investment firm which merely executes a client’s order legitimately and in the normal exercise of its duties does not engage in insider dealing, even if the client holds and uses inside information to place the order to buy or sell. (41)
85.      That interpretation is confirmed by recital 30 of Regulation No 596/2014. (42) In accordance with that recital, investment firms which confine themselves to executing their clients’ orders do not, in principle, engage in insider dealing. However, they do engage in such dealing if they carry out transactions for their own benefit on the stock market, using inside information obtained from clients.
86.      In that connection, Article 8(1) of Regulation No 596/2014 does not impose on investment firms the obligation to demonstrate
that their clients, in placing the orders, are not engaging in insider dealing. Such a burden of proof would be disproportionate and would impede the provision of their services, which are necessary for the smooth operation of the financial markets.
87.      Admittedly, investment firms must have effective mechanisms, systems and procedures to prevent and detect insider dealing and also attempted insider dealing (Article 16(1) and (2) of Regulation No 596/2014).
88.      Where such a firm has a reasonable suspicion that an order relating to any financial instrument could constitute insider dealing or attempted insider dealing, that firm must notify the competent authority without delay (Article 16(2) and (3) of Regulation No 596/2014).
89.      However, that duty of disclosure, which is somewhat preventive in nature, (43) does not mean that investment firms are required to establish the (negative) fact that the client did not engage in conduct which may be caught by Article 8(1) of Regulation No 596/2014.
90.      According to the information in the Court’s possession, A. did not notify the Bank of Lithuania of the sale of C.’s shares, which it carried out simultaneously through ABB and on the regulated market. The issue in these proceedings (and the reason why the Bank of Lithuania imposed a penalty on A.) is an infringement of Article 14, not Article 16(1) and (2), of Regulation No 596/2014. (44)
91.      In short, Article 8(1) and Article 14(a) of Regulation No 596/2014 must be interpreted as meaning that an investment firm may rebut the presumption referred to in recital 24 of the regulation by demonstrating that it confined itself to executing the order to dispose of its client’s shares legitimately and in the normal exercise of its activities, in accordance with the client’s instructions. It is not necessary for the firm to demonstrate that the client did not use inside information when it placed the order.
V.      Conclusion
92.      In the light of the foregoing considerations, I propose that the following replies be given to the Lietuvos vyriausiasis administracinis teismas (Supreme Administrative Court of Lithuania):
(1)      Question 4 is inadmissible.
(2)      Article 9(2)(b) of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC
must be interpreted as meaning that:
–        An investment firm which executes orders to sell securities on the regulated market, placed by a client under a standard services agreement, and, simultaneously, organises for that same client an accelerated bookbuilding and placement of securities procedure does not engage in insider dealing unless the supervisory authority shows that: (a) that firm held inside information concerning the client’s intentions with regard to the price of the securities which were to be disposed of outside the regulated market; and (b) that firm’s conduct did not meet the applicable professional standards.
–        If the conditions laid down in Article 9(2)(b) of Regulation No 596/2014 are met, it cannot be presumed that the investment firm [infringed]
the prohibition laid down in Article 14(a) of that regulation, unless the competent national authority, in accordance with Article 9(6) of Regulation No 596/2014, establishes that there was an illegitimate reason to comply with the order to sell.
(3)      Article 8(1) and Article 14(a) of Regulation No 596/2014 must be interpreted as meaning that an investment firm may rebut the presumption referred to in recital 24 of the regulation by demonstrating that it confined itself to executing the order to dispose of its client’s shares legitimately and in the normal exercise of its activities, in accordance with the client’s instructions. It is not necessary for the firm to demonstrate that the client did not use inside information when it placed the order.
1      Original language: Spanish.
2      Regulation of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (OJ 2014 L 173, p. 1).
3      Accelerated bookbuilding and placement of securities are procedures that are normally used on capital markets to offer qualified investors (institutional or otherwise) new shares issued on the occasion of an increase of capital or a block of shares which already exist in a public company. The order for reference uses the English term
‘accelerated bookbuilding’ to refer to the procedure used in this case. From now on, I shall refer to it as
‘ABB’.
4      The announcement was made through the information system of the public limited company Nasdaq Vilnius vertybinių popierių birža (‘the Stock Exchange’).
5      The weighted average price of shares in the issuing company on the regulated market was EUR 5.4348463 per share on
21 November 2019 and EUR 5.0194492 per share
on 22 November 2019.
6      Shares were sold for a total of EUR 246 412.03; the highest price was EUR 5.50 per share and the lowest was EUR 4.78; C. began the session selling at EUR 5.40 per share and ended it at EUR 4.78 per share.
7      Paragraphs 35
to 41 of the order for reference.
8      A. confirmed that point at the hearing, pointing out that the ABB was also open to small investors and not only to qualified investors. In fact, A. stated that a number of small investors purchased shares in the ABB.
9      Directive of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (OJ 2014 L 173, p. 349).
10      It is not in dispute that such information fulfils the four essential elements, which are ‘mutually independent and constitute minimum conditions, each of which must be met if information is to be regarded as “inside” information’. In that connection, the information must be ‘of a precise nature’; it must not have been ‘made public’; it must relate ‘directly or indirectly’ to one or more financial instruments or their issuers’; and, if it were made public, it ‘would be likely to have a significant effect on the prices of those financial instruments or on the price of related derivative financial instruments’. See judgments of
11 March 2015, Lafonta (C‑628/13, EU:C:2015:162, paragraphs 24
and 28), and of 15 March 2022, Autorité des marchés financiers (C‑302/20, ‘the judgment in Autorité des marchés financiers’, EU:C:2022:190, paragraph 33).
11      Judgment of
23 December 2009, Spector Photo Group and Van Raemdonck (C‑45/08, ‘the judgment in Spector’, EU:C:2009:806, paragraph 53).
12      The judgment in
Spector, paragraph 54. Since then, that presumption has been called the ‘Spector
rule’. The possibility that the accused person may rebut the presumption is known as the
‘Spector
exemption’. See Klöhn, L., ‘The European Insider Trading Regulation after Spector Photo Group’, European Company and Financial Law Review, 2010, p. 347.
13      The judgment in
Spector, paragraph 55.
14      Transcribed in point 5
of this Opinion.
15      Judgment of 11 March 2015, Lafonta (C‑628/13, EU:C:2015:162, paragraph 21), and the judgment in Autorité des marchés financiers, paragraph 43.
16      The judgment in Spector, paragraphs 56
to 61.
17      The judgment in
Spector, paragraph 61.
18      Veil, R., ‘§ 14. Insider Dealing’, in
Veil, R., European Capital Markets Law, 3rd ed., Hart Publishing, Oxford, 2022, p. 213, and Winner, M., ‘Article 9: Legitimate Behaviour’, in Kalss, M., Oppitz, S., Torggler, U. and Winner, M. (eds), EU Market Abuse Regulation – A Commentary on Regulation (EU) No 596/2014, Edward Elgar, 2021, p. 117.
19      Recital 30 of Regulation No 596/2014 states, in that connection, that ‘the mere fact that … persons authorised to execute orders on behalf of third parties with inside information confine themselves to carrying out, cancelling or amending an order dutifully, should not be deemed to constitute use of such inside information. However, the protection, laid down in this Regulation, of … persons authorised to execute orders on behalf of third parties with inside information, does not extend to activities clearly prohibited under this Regulation including, for example, the practice commonly known as “front-running”.’ ‘Front-running’ is a practice involving market manipulation, whereby a broker takes advantage of inside information it possesses about orders from clients by carrying out transactions for its own benefit.
20      Unless I am mistaken, the Court has not yet ruled on that exception but has done so in respect of the exception set out in Article 10(1) of Regulation No 596/2014, which lays down the condition of a close link between the disclosure of inside information and the exercise of an employment, a profession or duties in order to justify that disclosure. Judgment of
22 November 2005, Grøngaard and Bang (C‑384/02, EU:C:2005:708, paragraphs 31 and 34), and the judgment in Autorité des marchés financiers, paragraph 78.
21      Hansen, J. L., ‘Article 9: Legitimate Behaviour’, in Ventoruzzo, M. and Mock, S., Market Abuse Regulation: Commentary and annotated Guide, 2nd
ed., Oxford University Press, Oxford, 2022, p. 336. See also BaFin, Issuer Guidelines, Modul C: Requirements based on Market Abuse Regulation, 2020, p. 57, available at https://www.bafin.de/SharedDocs/Downloads/EN/Leitfaden/WA/dl_emittentenleitfaden_modul_C_en.html?nn= 19584146, ‘If a transaction is carried out in which the obligation concerned is based on an order that was placed or an agreement that was concluded before the possession of inside information, or which serves to satisfy a legal or regulatory obligation that arose before the possession of inside information, there is also no presumption under Article 9(3) of the MAR that the inside information was used. In this case, there is no causal link between the possession of inside information and the decision to place the order, because the obligation [arose] before the possession of inside information’.
22      Klöhn, L., ‘The European Insider Trading Regulation after Spector Photo Group’, European Company and Financial Law Review, 2010, p. 360.
23      Article 4(1)(5) of Directive 2014/65 defines the execution of orders on behalf of clients as ‘acting to conclude agreements to buy or sell one or more financial instruments on behalf of clients and includes the conclusion of agreements to sell financial instruments issued by an investment firm or a credit institution at the moment of their issuance’.
24      ‘… that recital states that the mere fact that market-makers, bodies authorised to act as counterparties, or persons authorised to execute orders on behalf of third parties with inside information confine themselves to entering into market transactions legitimately and dutifully “should not in itself be deemed to constitute use of such inside information”’.
The judgment in
Spector, paragraph 58.
25      The judgment in
Spector, paragraph 57.
26      In accordance with recital 29 of Regulation No 596/2014, ‘in order to avoid inadvertently prohibiting forms of financial activity which are legitimate, namely where there is no effect of market abuse, it is necessary to recognise certain legitimate behaviour. …’
27      These include ‘reception and transmission of orders in relation to one or more financial instruments’ (point 1); ‘execution of orders on behalf of clients’ (point 2); ‘underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis’ (point 6); and ‘placing of financial instruments without a firm commitment basis’ (point 7).
28      As I pointed out above, the ABB used in this case was open to investors of
all types, large and small. It is the case that A. contacted large investors (funds) to obtain offers to purchase shares.
29      Article 23(1) provides that those firms must take ‘… all appropriate steps to identify and to prevent or manage conflicts of interest between themselves, including their managers, employees and tied agents, or any person directly or indirectly linked to them by control and their clients or between one client and another that arise in the course of providing any investment and ancillary services, or combinations thereof …’
Article 24(1) provides that investment firms must act ‘… honestly, fairly and professionally in accordance with the best interests of its clients …’
In accordance with Article 27(1), when executing orders, investment firms must ‘take all sufficient steps to obtain … the best possible result for their clients taking into account price, costs, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to the execution of the order. Nevertheless, where there is a specific instruction from the client the investment firm shall execute the order following the specific instruction.’
30      A. stated at the hearing that this was the first ABB organised in the Baltic States.
31      At the hearing, A. stated that the commission received was EUR 4 928, a sum which cannot be classified as a benefit because it was merely the price received for the supply of a service.
32      Recital 23 of Regulation No 596/2014. Emphasis added.
33      At the hearing, the Lithuanian Government stated that company C. no longer existed as a legal person and therefore it was not possible to bring proceedings leading to the imposition of a penalty against it.
34      Paragraphs 66
to 71 of the order for reference.
35      According to the first subparagraph of Article 8(4) of Regulation No 596/2014, ‘applies to any person who possesses inside information as a result of: … (b) having a holding in the capital of the issuer or emission allowance market participant; (c) having access to the information through the exercise of an employment, profession or duties …’.
36      The situation would be different if the decision to dispose of the shares at a particular price had been taken by the issuing company and one of its shareholders, which was aware of that information, had used the information for its own benefit, before it was made public, to sell or buy shares in that company. In that case, the shareholder would have engaged in insider dealing.
37      In this case, the relationship of confidence (referred to, inter alia, in the judgment in
Spector, paragraph 36),
which links the primary insiders referred to in the first subparagraph of Article 8(4) of Regulation No 596/2014 to the issuer of the financial instruments, does not exist.
38      ‘This Article also applies to any person who possesses inside information under circumstances other than those referred to in the first subparagraph where that person knows or ought to know that it is inside information’ (second subparagraph of Article 8(4) of Regulation No 596/2014).
39      ‘Since the acquisition or disposal of financial instruments necessarily involves a prior decision to acquire or dispose taken by the person who undertakes one or other of those operations, the mere fact of making such an acquisition or disposal should not be deemed to constitute use of inside information. Acting on the basis of one’s own plans and strategies for trading should not be considered as using inside information …’
40      ‘… Information regarding the market participant’s own plans and strategies for trading should not be considered to be inside information …’
41      The referring court states that
A. did not propose that C. trade simultaneously on the regulated market
or induce C. to do so. It does not appear, therefore, that this is a case of insider dealing contrary to Article 14(b) of Regulation No 596/2014 (‘recommend that another person engage in insider dealing or induce another person to engage in insider dealing’). The penalty was imposed in response to the infringement of Article 14(a) of that regulation.
42      Transcribed in footnote 19 to this Opinion.
43      See Litten, R., EU Capital Market Law. The Law of Financial Instruments, Edward Elgar, 2024, p. 114.
44      At the hearing, the Lithuanian Government stated that the Bank of Lithuania considered that
proceedings in respect of the possible infringement, by A., of Article 16(1) and (2) of Regulation No 596/2014 could be brought by the supervisory authority of Estonia, the Member State where A. has its headquarters. The Lithuanian Government added that proceedings were commenced in that State but no penalty has been imposed yet and there is no information about the status of those proceedings.