Private Enforcement of Capital Markets Regulation
In some EU member states, the discussions whether EU capital markets regulations, such as the transparency regime or the market abuse regime, oblige member states to provide for the possibility private enforcement by investors is ongoing. In Austria, the courts have already decided that private enforcement of capital market regulations is possible, based on the concept of protective laws.
On March 30, 2011, the Austrian Supreme Court (7 Ob 77/10i) decided that the corporate law rules on the prohibition of repayment of capital, the purchase of own shares and the obligation of equal treatment of all shareholders, do not prevent prospectus liability claims by shareholders against an issuer. The core rationale of this decision was that the claims of shareholders under prospectus liability laws are to be treated like the claims of any creditor and not as claims based on the corporate law relationship between an issuer and its shareholders. A year later, on March 15, 2012, the Austrian Supreme Court (6 Ob 28/12d) in another case confirmed the decision of March 30, 2011. In addition, the Court held that the capital market regulations on the issuer's ad-hoc publicity obligation and the prohibition of market manipulation qualify as protective laws for the benefit of investors, and claims based on a violation of such protective laws against the issuer are not excluded by corporate law capital maintenance and equal treatment of shareholder rules. On December 19, 2013, the ECJ (C-174/12) held that member states may allow liability claims under the laws implementing the Prospectus Directive, the Transparency Directive, and the Market Abuse Directive against the issuer.
Today, it is well-established case law in Austria that investors may raise liability claims against the issuer for (negligent) violation of prospectus law, violations of the ad-hoc publicity obligation of the issuer, and for a violation of the prohibition of market manipulation. Claims may be raised not only against the issuer but against any person in negligent breach of such regulations. Liability claims for violations of the obligation to disclose major shareholdings and for directors' dealings disclosure have so far not been brought before the Supreme Court, but once they are it is likely that the Supreme Court will also qualify these regulations as protective laws and allow for damage claims in case of violations. Taken together with the dramatically increased administrative penalties for a violation of capital market regulations, the possibility of investors claiming damages for violations of capital market regulations underlines the importance of capital markets compliance for Austrian issuers.
This post comes to us from Wolf Theiss. It was authored by Markus Heidinger.
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