French Council of State
2012, 24 April, Pelras et Questrebert
Complete reference : Conseil d’Etat (French Council of State), Pelras et Questrebert, 2012, 24 April, judgement n°338929.
To read the decision (in French), click here.
On January 30, 2010, the "Commission des sanctions" (Sanction Commission) of the French Financial Markets Regulator ("Autorité des Marchés Financiers" -AMF) has sanctioned, by administrative fines, two fund managers to have used inside information, what constitutes a breach of insider trading prohibited by the "Code monétaire et financier" (French Monetary and Financial Code).
On Field probation, the "Conseil d’Etat" (French State Council) admits that without direct evidence, the regulator may settle for a body of evidence from which it follows that the action on the market of those prosecuted may restrict explained by the detention of the information in question.
According to the State Council, it is not necessary that the Sanction Commission establishs precisely the conditions under which the information has come down to the defendant. Just as the action of it on the market can be explained only by the possession of inside information. This presomption is sufficient.
But, according to the State Counil, it can not be an "implicit information". In the present case, the only information communicated to the managers did not allow them to deduce an imminent takeover.
This is why the Council of State considers that the only information provided to managers do not back the transaction (an IPO) and do not constitute an implicit revelation.
The sanction decided by the regulator is broken by the present decision.
Once again we see how the question of evidence is important in regulation. Even if the administrative repression is less demanding and protective of people that the criminal law in this area, because it allows more easily the evidence by presumption, jurisdictions look after the due process protection .
This sanction cancelled by the State Council illustrates the limit imposed by the judges to the flexibility of administrative repression.
It remains to find the right border of proof by presumption, accepted, and implicit evidence,prohibited. It will be a casuistic approach.