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Published online by Cambridge University Press: 03 April 2024
CASE
Company A is an oil drilling company. Its shares are listed on a stock exchange and offered to the public. In its mission statement and corporate social responsibility statement, it declares that it will take care of the potential environmental impact of its business activities during all stages of operating these activities. The company is fined by a local environmental protection agency for violating local environmental protection law through its activities. The company does not disclose this information to the investor market, despite its likely impact on its share price. When this information finally comes to the knowledge of investors, the share price drops by 30%.
Many investors claim their investment losses from company A. Will they receive compensation and, if so, for what losses? And is it possible to start a collective proceeding? If so, please indicate the most important bottlenecks in this particular case.
DISCUSSIONS
AUSTRIA
Matthias Dangl and Georg E Kodek
Operative Rules
The company has violated its duty to inform the public as soon as possible of inside information (Article 17 of the Market Abuse Regulation (MAR)). Therefore, the investors are entitled to demand compensation under Austrian tort law (§ 1311 of the Austrian Civil Code in conjunction with Article 17 MAR). They will receive the difference between the price they actually paid and the hypothetical price they would have paid if the information had been provided correctly.
A collective action (as described in the section on procedural aspects) would be possible.
Legal Formants
The purpose of Article 17 MAR is – besides the protection of the market – the protection of investors. All investors should have the same access to information, and the information should be reflected in the market price. Therefore, the scope of protection includes price damages suffered by the investor. This is the difference between the price that would have been formed if the information were correct and the price that exists as a result of the breach of duty.
BELGIUM
Artuur Keukeleire, Larissa Vanhooff and Britt Weyts
Operative Rules
The non-disclosure of inside information on the fine constitutes a violation of the European Market Abuse Regulation (MAR). The company directors are liable towards the shareholders, who may institute proceedings individually or, in some circumstances, seek collective redress.
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