The decision of the AMF Enforcement Committee of 27 November 2023 provides interesting analysis of the procedural and substantive implications of a conflict of interests between an issuer and its former executives in proceedings for market manipulation through the dissemination of false or misleading information. It also illustrates various findings of breaches involving the dissemination of false or misleading information concerning the issuer’s revenue, its prospects for deploying and developing a technology presented as innovative, and its financing transactions.
- AMF, decision, 27 November 2023, No. 15, : available at https://lext.so/_ONmbP
1. In the decision under review, the Enforcement Committee of the French Financial Markets Authority (Autorité des marchés financiers, AMF) imposed sanctions on Visiomed Group (hereinafter « Visiomed » or the « company »), listed on Euronext Growth since July 2011, for the false or misleading nature of several financial disclosures. The disclosures at issue were:
- three press releases concerning the company’s targets or revenue (releases of 13 October 2017, 26 January 2018 and 30 April 2018), and the annual financial report made available on the company’s website on 30 April 2018;
- three press releases concerning the prospects for developing and deploying a technology of the company presented as innovative (releases of 10 April 2018, 17 September 2018 and 31 October 2018);
- six press releases concerning the group’s fundraising transactions, namely two financing transactions involving bonds convertible into shares with attached share subscription warrants (OCABSA – releases of 16 July 2018, 24 December 2018, 28 January 2019 and 20 February 2019 concerning the transaction with the Hudson Bay fund, and releases of 8 March 2019 and 27 May 2019 concerning the transaction with the Negma fund).
2. Two of its former corporate officers, Mr X and Mr Y [1], also faced proceedings before the Enforcement Committee. They held directorships and/or executive positions that changed during the period in which these various releases were prepared and published, before they were removed from office by the company. Both were also sanctioned in respect of various disclosures for which they may have been responsible or which could be attributed to them because of their involvement in their preparation or dissemination.
It is noteworthy that the company’s defence consisted in disputing that the breach could be attributed to it, on the ground that the actions of its two former executives had taken place « outside the lawful scope of [their] duties » (paras. 55, 78, 97, 115, 135, 143, 156, 180, 202, 222, and 243).
3. The decision under review thus provides interesting illustrations of breaches involving the dissemination of false or misleading information where the disclosure concerns the three types of information described above (I). Its principal contribution, however, appears to lie in the Enforcement Committee’s assessment of the procedural and substantive implications of a conflict between the interests of the issuer and those of its former executives, where the former disputes that it can be held responsible for inaccurate disclosures disseminated in its name by the latter (II).
It should be noted that the decision also imposed sanctions on one investor for failing to notify crossings of thresholds for net short positions. That issue will not be discussed here, as the decision applies the relevant criteria in a conventional manner in that respect (paras. 272 et seq.).
_I – Establishing the false or misleading nature of information
4. An issuer’s activities are generally described through its accounting, financial and legal disclosures, as well as the transactions it carries out. The decision under review provides conventional yet interesting illustrations of breaches involving the dissemination of false or misleading information through disclosures concerning revenue targets or the substance of revenue itself (A), the prospects for deploying and developing a technology presented as innovative (B), and the issuer’s financing transactions (C).
__A – False or misleading information concerning the issuer’s current or projected revenue
5. Accounting and financial information is the information most commonly monitored by analysts and investors. Accordingly, an issuer’s disclosures concerning its revenue will generally be capable of affecting its share price [2].
In this respect, the Enforcement Committee is generally required to examine the existence or substance of the completed or proposed commercial transactions to which the disclosure relates. The decision under review provides several illustrations.
6. In this case, in an initial release issued on 13 October 2017, the company announced a revenue target including « sales growth of more than 30 % for the full financial year », resulting from « orders already received » and « commercial momentum » supported by « growing enthusiasm for the solutions developed by the Group ». The executives also stated that these announcements took account of an order placed by a customer for « several million euros » to enable that customer to respond to a public invitation to tender (paras. 34 and 35).
Consistent with its case law on forward-looking information, the Enforcement Committee did not merely note that the announced result had not been achieved [3]. It found that the information was false or misleading on the basis of an analysis of its consistency with revenue generated in previous years. The announced target required revenue in the final quarter of activity to exceed twice the average revenue generated over a six-month period. Furthermore, according to the Committee, the order invoked to justify that target was by no means certain, despite being included among the orders « already received » in the release.
7. As regards the information disseminated concerning revenue itself through two press releases (of 26 January and 30 April 2018) and Visiomed’s 2017 annual financial report, the Enforcement Committee examined, in particular, the disclosed figures including an amount corresponding to the signing of « substantial international orders for medical devices ». It found that, although two invoices had indeed been drawn up and sent to the customer in connection with the order, the quotation previously prepared had not been formally accepted by that customer. Furthermore, no purchase order had been sent to Visiomed and, according to the Committee, there was no evidence that orders had actually been prepared.
Moreover, there was no accounting evidence that the invoicing of certain items would actually be deferred to the following financial year, as stated in the first release.
The Committee also relied on the statutory auditors’ refusal to recognise those orders until receipt, on 26 April 2018, of a certificate confirming the customer’s ownership of the goods.
The false or misleading nature of information concerning revenue was therefore assessed through a rigorous examination of the reality of the commercial transactions on which the issuer had based its disclosures.
__B – False or misleading information concerning the development of a technology presented by the issuer as innovative
8. Technical and/or commercial successes announced by issuers may constitute information of interest to investors.
In this case, Visiomed first announced, on 10 April 2018, the launch of a medical teleconsultation service using a technology it had developed called « Visiocheck ». Visiomed also stated that, at a specialist trade fair, the company had recorded « dozens of firm orders and order commitments », and had set targets of « 300 VisioCheck® stations in pharmacies during 2018 » and « 3 000 VisioCheck® teleconsultation stations in the French pharmacy network alone over the next 24 to 36 months ».
The Enforcement Committee nevertheless found that the examination of the company’s sales director’s records did not establish that the reported orders actually existed, and that an internal document recording the existence of orders had no evidential value unless supported by documentary evidence. However, the investigators’ failure to verify the existence of an order book containing orders not yet recorded, and their failure to interview Visiomed’s sales director, prevented a finding of a breach in relation to the announcement of « dozens of firm orders and order commitments ».
This position deserves approval: it was the incompleteness of the investigation, rather than any proof Visiomed might have provided of the actual existence of the orders in question, that led the Enforcement Committee to rule out any breach on this ground.
The other information in that release, concerning prospects which, according to the Committee, were unsupported by any quantified analysis, was nevertheless found to be false or misleading. The Committee identified several factors casting doubt on those prospects, which it considered unrealistic and unattainable (for example, the technology in question was not operational at the time of publication).
9. The second release, dated 17 September 2018, contained information concerning the deployment of the technology presented as enabling teleconsultations in pharmacies. The Enforcement Committee established that only one such system had actually been installed, that technical problems could hinder deployment, that no platform of doctors responsible for providing the consultations existed, and that the regulatory framework defining the role of the pharmacists for whom it was intended had not yet been established.
This analysis is unsurprising and corresponds to the Committee’s reasoning in relation, for example, to the opening of new branches [4] or the development of a manufacturing process [5].
10. Finally, a third release, dated 31 October 2018 and entitled « Promising start for Augmented Teleconsultation in pharmacies since 15 September 2018 », was found to be false or misleading because Visiomed had expressed confidence « in its ability to achieve a substantial ramp-up over the coming months » owing to « its sales network in daily contact with pharmacies and its capacity to install several hundred VisioCheck® teleconsultation stations ».
The Committee nevertheless noted that the targets remained unattainable for reasons comparable to those cited in relation to the preceding release.
__C – False or misleading information concerning the issuer’s financing transactions
11. It should be recalled that, in this case, the public disclosures concerning the company’s financing comprised six press releases concerning the group’s fundraising transactions, namely two OCABSA financing transactions (releases of 16 July 2018, 24 December 2018, 28 January 2019 and 20 February 2019 concerning the transaction with a Hudson Bay fund, and releases of 8 March 2019 and 27 May 2019 concerning the transaction with a Negma fund).
12. With regard to the first financing transaction, the Committee first examined a release of 16 July 2018 announcing « the drawdown, on 13 July 2018, of a tranche of OCA under the financing agreement established on 26 February 2018 with the US company Hudson Bay Capital Management, which manages Hudson Bay Master Fund Ltd / Issue of OCA / The transaction involves Hudson Bay Capital Management’s exercise of 9 warrants (“BEOCA”) to subscribe for bonds convertible into shares (“OCA”), resulting in Hudson Bay Capital Management subscribing for a tranche of BEOCA. This tranche of BEOCA corresponds to the issue of 900 OCA with a nominal value of 1 000 € each, representing a bond loan of 900 000 € (846 000 € net). The 426 945 underlying share subscription warrants (BSA) become exercisable and will result in the issue of 900 000 new shares if exercised in full (…) »
In finding the disclosed information false or misleading, the Enforcement Committee held that Visiomed had failed to state that, in reality, owing to a set-off mechanism and a debt owed to the fund in question, Visiomed would not receive the full theoretical amount if the bonds were converted into new shares at a market price below the shares’ nominal value. Although that debt arose from earlier drawdowns, its classification under the financing agreement as « connected claims » in relation to the drawdown at issue meant that this information should have appeared in the release (para. 151).
Conversely, the failure to disclose the company’s cash-flow difficulties was not considered to constitute false or misleading information, since the issuer’s sources of financing enabled it to address those difficulties in the short term.
13. According to the Enforcement Committee, the second release, dated 24 December 2018 and concerning financing provided by the Hudson Bay fund, contained several items of false or misleading information, as it stated that the completed capital increase with pre-emptive subscription rights maintained could not be considered sufficient to cover the group’s financing requirements « for the next twelve months » (paras. 173 and 174).
The evidence examined by the Committee led it to find that there had been several warnings concerning the company’s cash position, and an accumulation of debt exceeding the financing, which other sources of financing did not offset « over the next six months ». The decision also found that, in its circumstances, the company could not « rely on further extensions of its unpaid and deferred payment obligations ».
14. The third release, issued on 28 January 2019, concerning the drawdown made on 24 January 2019 under the OCABSA financing programme with the Hudson Bay fund, was also found by the Committee to be false or misleading.
More specifically, the breach consisted in the incompleteness of the information and « the reference to a “bond loan of 1 500 000 € (1 410 000 € net)” [which] suggested that Visiomed had received 1,41 million euros when it had received 105 990 euros » (para. 197), since, according to the Committee, investors could not determine in those circumstances the amount actually received by the company.
15. The fourth release, issued on 20 February 2019 concerning the termination of the OCABSA financing programme with the Hudson Bay fund, was also found to be false or misleading because, according to the Committee, « the statement that Visiomed considered that it “had sufficient financial resources to meet its obligations until June 2019” disregarded the risks associated with the accumulation of unpaid debts » (para. 218).
16. As regards the second financing transaction with the Negma fund, the Enforcement Committee examined an initial release dated 8 March 2019 concerning a capital increase reserved for a specified investor.
In particular, it criticised the failure to mention in the release that the capital increase was linked to a « broader OCABSA financing transaction », while the correspondence reviewed stated that its purpose was to finance the debt incurred with the Hudson Bay fund. Furthermore, on 24 December 2018 Visiomed had announced its intention to terminate this type of financing. These factors established the breach.
17. Finally, the Enforcement Committee considered the final release concerning the OCABSA financing programme with the Negma fund, dated 27 May 2019, which stated, in particular, that the financing was a means of « strengthening and supporting the 2020 development plan, both by accelerating the establishment of positions in highly promising and dynamic market segments and by accelerating the acquisition-led growth strategy ».
However, at the date of that release, the funds obtained in this way were being used to repay the company’s overdue payment obligations, and the Committee noted that « no growth strategy had been established ». The release also failed to disclose the existence of a cash settlement clause enabling the debt to be managed, a fee of 900 000 € payable to Negma, and a bonus of 1,5 % of the total commitment payable to the executive. The Committee also found this release to be false or misleading.
18. The decision under review therefore provides a useful reference for preparing or analysing any financial disclosure relating to an issuer’s financing. It underscores the importance of the issuer providing the fullest possible disclosure of the circumstances of its financing arrangements, considered in the context of its actual financial position.
The principal interest of the decision, however, appears to lie in the procedural and substantive arguments raised by the issuer after a conflict arose with its former executives and it disputed that the disclosures they had disseminated in its name could be attributed to it.
_II – Evidence and attribution of breaches involving the dissemination of false or misleading information where the issuer’s interests conflict with those of its former executives
__A – Effect of the conflict of interests on the adversarial nature and fairness of the proceedings
19. This case presents the relatively unusual situation of an issuer having removed its executives from office before the AMF even opened the investigation that would lead to proceedings against both the company and those executives. Relations between the company and its former corporate officers had deteriorated to such an extent that the company had announced that it would bring legal proceedings against them and refer the matter to the AMF [6] (which had not yet opened its investigation). This antagonism between the legal entity and its former executives manifested itself in various respects in the proceedings before the Enforcement Committee.
20. The first effect of this conflict concerned the adversarial nature of the gathering of evidence and of the proceedings in relation to the former executives.
As is well known, within its remit [7] the AMF has broad investigative powers enabling it to seek and gather evidence of any potential breach. These powers allow authorised investigators to require the production of « any documents, irrespective of the medium on which they are stored » (Monetary and Financial Code, Art. L. 621-10) [8]. Obstruction of the investigators’ gathering of such evidence, or interference with its integrity, is also punishable both administratively [9] and criminally [10] (the two penalties may not be imposed cumulatively [11]).
In particular, any interference with access to information or with its intrinsic integrity that would prevent the AMF from examining it is punishable. The Enforcement Committee’s case law provides an example in a case in which an issuer’s executive, following a request from AMF investigators, deleted emails relating to the investigation from his mailbox before providing the officials with an expurgated copy [12]. In that case, the executive had himself emphasised the allegedly exhaustive nature of the data supplied, before being exposed by a technical expert examination.
21. The decision under review, for its part, raises questions concerning the procedural arrangements in the converse situation, where the former executive himself challenges the integrity of the data supplied to the AMF and the investigators’ handling of it.
During a visit conducted pursuant to their « statutory powers » [13] , the AMF investigators obtained from Visiomed a hard drive containing copies of the two former executives’ professional email accounts, appended to a bailiff’s formal record of findings commissioned by the company following their removal as directors.
The two individuals then invoked their conflict with Visiomed and, in particular, alleged a breach of the duty of fairness during the investigation: the investigators had allegedly failed to verify the circumstances in which Visiomed had obtained the hard drive; they had allegedly « taken at face value » Visiomed’s assertion that the emails had been sorted in the presence of the two former executives, which the latter denied; and the investigators had allegedly disregarded the bailiff’s « shortcomings » in drawing up the record. According to the two former executives, these various deficiencies meant that the evidential value of the material relied upon in support of the statement of objections could not be guaranteed.
Relying on the right to a fair trial guaranteed by Article 6, 1, of the Convention for the Protection of Human Rights and Fundamental Freedoms, they also challenged « the integrity and evidential value of the copies of the professional email accounts of Visiomed’s administrative and financial director and sales director at the material time », the investigators’ failure to request access to other professional email accounts, their failure to interview certain persons who might have knowledge of the facts under examination, and the inclusion in the case file of statements obtained outside any formal interview procedure (paras. 3 and 4).
The Enforcement Committee rejected these criticisms.
22. Having recalled that investigators « freely determine the nature and scope of the investigations they decide to conduct within the investigation entrusted to them, as well as the treatment of the steps taken, documents examined and persons interviewed » (para. 7), the Enforcement Committee stated that « unfairness is not presumed, and the person alleging it must prove it » (para. 8).
It then noted, in particular, the limited number of messages contained in the copy of the administrative and financial director’s email account supplied by the company, and « numerous anomalies » relating to the copy supplied of the sales director’s data at the material time. It also noted that « the investigation file does not record any verification by the investigators of the circumstances in which Visiomed obtained the hard drive compiled by the bailiff, or the circumstances in which the sequestration was lifted ». Nevertheless, the Enforcement Committee did not consider that this situation was « in itself capable » of calling into question the copies of the email accounts used by the investigators (paras. 11 et seq.).
The Committee further emphasised that neither of the two former executives facing proceedings had identified any evidence capable of calling into question the integrity of the copies of their professional email accounts made by the bailiff. Moreover, the existence of a conflict between « the employer and its employees or legal representatives » was likewise insufficient to call into question the circumstances in which the investigators had conducted their investigations.
Although the investigators did not identify any interference with the data, the cumulative effect of the various instances of data handling, without adversarial safeguards, before the data were supplied to the investigators could have raised questions about the completeness of the information disclosed by the issuer, which claimed that its former executives had concealed part of the company’s situation from its finance or accounting teams. These circumstances, and the conflicting procedural interests of the company and its former executives, could have prompted further verification of the latter’s allegations.
23. The Committee also rejected the second procedural plea raised by the former executives. They alleged that the AMF had breached the adversarial principle, equality of arms and the duty of fairness in the investigation, because, after service of the statement of objections, they had been unable to access the full contents of the email accounts supplied by Visiomed during the investigation.
In explaining its decision, the Committee relied on the investigation charter, which, although « for information purposes only », provided, in the version applicable at the material time, that investigators were free to « select the documents useful to the case file, provided that this selection does not violate the principles of fairness and equality of arms in the prosecution, and does not actually prejudice the rights of the defence » (para. 29). This freedom of selection, subject to the duty of fairness, is regularly reaffirmed in the case law of the Enforcement Committee and the courts hearing appeals [14].
The plea raised by the individuals was also rejected because they had not proved that material had been « withheld » by the investigators in making their selection, and because the respondents had been able to « produce additional documents they considered useful to their defence ». It is nevertheless difficult to conclude that the former executives had effectively been given the opportunity to prove that material useful to their defence had been excluded from the case file by the investigators, and to provide all material useful to their defence, if at no stage of the investigation had they been able to access all the data processed by the investigators. Conversely, it is also difficult to accept that any person under investigation may unconditionally obtain disclosure of every document or item of information to which AMF officials, who are bound by professional secrecy, have access. Such information or documents may concern the rights and freedoms of third parties or be subject to various forms of confidentiality or restrictions, foremost among them trade secrets. This requires a delicate and complex balance between those rights or confidentiality protections and the defence rights of the persons concerned, which in this case depend on the duty of fairness requiring investigators to include all evidence in the case file, including exculpatory evidence. Case law offers little assistance to the person facing proceedings: to challenge the fairness and validity of the investigation, that person must prove the existence of exculpatory material excluded by the AMF [15]. Yet even if the accused discovers such exculpatory evidence and submits it in the proceedings before the Enforcement Committee, the procedure will not thereby be vitiated, since there is no infringement of defence rights once the document can be relied upon in support of innocence [16]… An unsatisfactory solution, in that it could encourage an actor disregarding the duty of fairness to adopt a regrettable « no detection, no consequences » approach…
Thus, the Committee does not appear inclined to sanction what might be feared as a risk of infringement of the adversarial principle, particularly likely to arise from a conflict of interests between parties to the proceedings.
__B – Effect of the conflict of interests on the attribution of a breach involving market manipulation through the dissemination of false or misleading information
24. A conflict between the procedural interests of the issuer and those of its former executive, who was in office when the financial disclosure under examination by the Committee was made, also raises the question of whether the breach may be attributed to either or both of them.
25. It is useful to recall the rules governing the attribution of breaches involving the dissemination of false or misleading information to the market. Before the entry into force of the Market Abuse Regulation (MAR), in the absence of a rule expressly laid down by the AMF General Regulation [18], case law established the principle that, in relation to financial disclosures, an issuer was bound by its executive’s statements, since « an executive acting in the exercise of his duties embodies the company in whose name and on whose behalf he speaks » (emphasis added) .
The Paris Court of Appeal further clarified this position by stating that « unless disavowed by the legal entity he represents, a corporate officer who takes decisions or acts in the exercise of the powers conferred by his office binds, through his decisions and actions, the company that appointed him to lead it and continues to place its trust in him » [19]. Although it has therefore been suggested that the executive’s removal from office or withdrawal of his corporate mandate could constitute such a disavowal [20], it will be observed
Furthermore, the Enforcement Committee has also held that, although the breach remained attributable to the issuer, the issuer could be exempted from a sanction in a case where its executive had deceived it and acted to its detriment by committing substantial misappropriations concealed in the accounts [21].
Under the law applicable before MAR entered into force, the corporate officer was responsible for complying, and ensuring compliance, with the issuer’s obligations concerning financial disclosures [22], and any delegation of powers and responsibility in that respect was ineffective [23]. His lack of involvement in preparing the financial disclosure did not, in itself, preclude the breach from being attributed to him personally [24] ; he could avoid liability only by proving that he had been prevented from performing his duties and from becoming aware of the misleading nature of the information disclosed [25].
There was therefore no obstacle to the same defective disclosure being attributed both to the issuer and to its executive, namely the person empowered to represent the issuer [26] – excluding, for example, a member of the board of directors or supervisory board [27] – and subject, of course, to that executive having been in office when the disputed disclosure was made [28].
26. With the entry into force of MAR on 3 July 2016, and more particularly Article 12, which makes the dissemination of false or misleading information an administrative infringement constituting market manipulation, the approach in this area changed. Article 12, 4, of the Regulation provides: « Where the person referred to in this Article is a legal person, this Article shall also apply, in accordance with national law, to the natural persons who participate in the decision to carry out activities for the account of the legal person concerned ». Having referred to national rules on attribution, the European mechanism first requires attribution to the legal entity, before considering the conditions under which the same breach may be attributed to any « person » who participated, on the company’s behalf, in the defective disclosure [29]. Since the issuer’s financial disclosures are disseminated in its name, breaches of the rules governing them are primarily attributable to it, but may also be alleged against those within the company who prepare or disseminate those disclosures.
The mechanism therefore now differs from the previous approach developed in case law (the company must answer for its executive’s breaches, since he necessarily acts in its name…). It also operates in the reverse direction to the mechanism applicable to criminal liability. The provision states that « legal entities (…) are criminally liable (…) for offences committed on their behalf by their governing bodies or representatives ». In that situation, the legal entity’s liability derives from the commission of an offence by one of its governing bodies or representatives, which is then attributed to the legal entity where it is established that they acted on its behalf. However, in view of the conditions for incurring such criminal liability, it would be conceivable that the legal entity could not be held responsible for offences committed by its executive to the issuer’s detriment rather than on its behalf [30].
This was the reasoning adopted by Visiomed in arguing that the disclosures of false or misleading information alleged against its former executives could not be attributed to it.
27. In this case, the two former executives had been removed from office and no longer held positions within Visiomed when the investigation began. In its defence, in respect of most of the financial disclosures attributed to those two former corporate officers, in which they had participated before their removal, the company argued that they had acted outside the « lawful scope of their duties » or the corporate mandates entrusted to them. Such actions beyond their duties could therefore give rise only to the personal liability of the officers concerned, and not that of the company itself. In doing so, the company implicitly advanced reasoning comparable to that governing a principal’s exemption from civil liability towards third parties for offences committed by its employees [31] or the imposition of civil liability on a corporate officer towards third parties in place of the company [32].
28. In response to this argument, the Enforcement Committee repeatedly affirmed the principle that « the issuer is responsible for information published in its name and on its behalf by one of its governing bodies or representatives » [33]. It nevertheless held the company liable for the established breaches, noting that it had not shown that the executive had acted « outside the lawful scope of his duties ».
To our knowledge, this principle of attribution to the issuer of disclosure breaches had previously been stated in these terms by the Committee only once, and very recently [34]. The Committee therefore appears to be establishing its case law along these lines. It is not easy to identify the provision specific to the AMF’s enforcement of market abuse rules on which this attribution rule is based. Its wording closely resembles the mechanism for the criminal liability of legal entities laid down by the provision; however, it departs from the mechanism established by Article 12, 4, of MAR, which does not follow precisely the same logic. These observations are admittedly only theoretical in scope, since, whether through embodiment or representation, the issuer and its executive are both held responsible for disclosure breaches by the Enforcement Committee or the courts hearing appeals.
29. Through this principle attributing to the issuer breaches committed by its governing bodies or representatives, the Committee appears, by reasoning a contrario, to open the door to a possible exemption for an issuing company able to establish that its officer made disclosures in its name « outside the lawful scope of his duties ». This possibility appears novel in this area and differs from the defence, conceivable in relation to the criminal liability of legal entities, that the executive committed the offence to the issuer’s detriment.
The implications of this position nevertheless remain uncertain and appear to echo both the Vivendi judgment mentioned above and the reasoning already discussed concerning the civil liability of executives acting outside the scope of their corporate duties.
It is nevertheless difficult to envisage circumstances in which financial disclosure by one of the company’s officers would fall outside the lawful exercise of his duties. It will be interesting to see whether the rule applicable to an executive’s civil liability is transposed here – whereby an intentional fault of particular gravity is considered incompatible with the normal exercise of corporate office [35] – and whether such fault by the executive would exempt the issuer from liability. It appears that breaches of disclosure obligations by a corporate officer, motivated by personal interest and detrimental to the company, should at least potentially result in a reduction of, or exemption from, the sanction imposed on the legal entity [36].
Indeed, this may explain, in the decision under review, the appreciable difference in the severity of the sanctions imposed by the Committee, those imposed on the two former executives being more severe than that imposed on the issuer [37].
30. Specifically, in this case, in rejecting the company’s argument that its former executives had acted outside the lawful scope of their duties, the Enforcement Committee relied on several findings:
- the absence of concealment of their conduct, demonstrated by several employees’ knowledge, at the material time, of internal emails relating to the disclosures that were the subject of the proceedings (para. 55);
- the lack of sufficient evidence to establish that the former executives had disclosed the disputed information solely for their own benefit, despite the existence of an intellectual property agreement entered into for the sole benefit of one of them (paras. 97 and 135);
- the irrelevance of the « unsuitable and ruinous » nature of the financing obtained by the former executives, which in any event represented the issuer’s only financing option at the time (the Committee also recalled that whether financing was appropriate was irrelevant to establishing the breach) (para. 156);
- the irrelevance of the receipt of a bonus by one of the two executives in connection with one of the financing transactions, that factor alone being insufficient to demonstrate that he had acted outside the scope of his duties (para. 266).
Furthermore, the termination of those executives’ positions and mandates after the disclosures in question, and the factual matters identified by the issuer, were not considered sufficient to establish that the breach could not be attributed to the issuer.
31. Finally, the decision under review also sheds light on the attribution to natural persons of breaches involving the dissemination of false or misleading information. The significant changes in the mandates and positions held by the two former executives within the Visiomed group provide useful illustrations of the criteria for attributing breaches to an issuer’s executives or employees.
In this case, all the breaches established against Visiomed, relating to twelve press releases and the publication of an annual financial report, were attributed to the first former executive under Article 12, 4, of MAR. The same breaches were established against the second former corporate officer on the same basis, with the exception of two releases [38].
The Enforcement Committee therefore relied on factual evidence establishing their respective actual participation in each disputed disclosure, rather than on an abstract assessment of whether they held executive office at the time of the disclosure concerned. The Committee noted, for example:
- work carried out on an order relied upon in a release to justify a revenue target, and access to the financial data relating to that order (para. 57);
- the existence of information of which they could not have been unaware in their capacity as executives (para. 99);
- information received by the executive from technical departments demonstrating that a statement in a release was false and that he was aware of this (paras. 118 and 138);
- the fact that the executive had received the draft release, had been copied into correspondence concerning its content, and had been involved in negotiating the announced financing agreement (para. 158);
- participation in preparing the release and in correspondence concerning the underlying financing (para. 182).
Conversely, the fact that the second individual facing proceedings did not hold executive office at the time of two of the disputed disclosures, and the absence of evidence establishing his participation in those disclosures, led to the rejection of a finding of a breach against him in those instances (paras. 117 and 137).
It is therefore noteworthy that, in this decision, executive status is treated as an indication of participation in the disclosure under Article 12, 4, of the Regulation MAR.
Footnotes
1 –
At the time of writing this commentary, the latter is the only respondent to have appealed the decision under review to the Paris Court of Appeal (https://lext.so/qYyoPj).
2 –
See, for example: AMF, decision, 29 March 2007, SAN-2007-16.
3 –
AMF, decision, 27 November 2009, SAN-2009-33.
4 –
AMF, decision, 19 January 2006, SAN-2006-16.
5 –
AMF, decision, 18 July 2018, SAN-2018-10.
6 –
Visiomed, press release, 12 September 2019: https://lext.so/09bk_K.
7 –
Monetary and Financial Code, Art. L. 621-9 et seq. See Études Joly Bourse, AMF: investigations, inspections and sanctions, No. B_EA040 M. Galland.
8 –
Monetary and Financial Code, Art. L. 621-10. See Études Joly Bourse, AMF: investigations, inspections and sanctions, No. B_EA040, No. 052, M. Galland.
9 –
Monetary and Financial Code, Art. L. 621-15, II, f), pursuant to Articles 23 and 30 of MAR – European Parliament and Council of the European Union, Regulation No. 2014/596, 16 April 2014
10 –
Monetary and Financial Code, Art. L. 642-2.
11 –
See, in particular, R. Salomon’s analysis, « Unconstitutionality of the administrative infringement of obstructing AMF investigations », BJB March 2022, No. BJB200o8, concerning Constitutional Council, priority preliminary ruling on constitutionality (QPC), 28 January 2022, No. 2021-965.
12 –
AMF, decision, 7 May 2018, SAN-2018-06.
13 –
Monetary and Financial Code, Art. L. 621-10.
14 –
Paris Court of Appeal, 28 June 2005, No. 05/02333, Vivendi: RTD com. 2005, p. 807, commentary by N. Rontchevsky – AMF, decision, 8 January 2009, SAN‐2010‐04: BJB May 2010, No. 27, p. 218, case note by A. Deprez-Graff – Court of Cassation, Commercial Chamber, 20 September 2011, No. 10-13591 – Court of Cassation, Commercial Chamber, 20 September 2011, No. 10-13878 – Court of Cassation, Commercial Chamber, 20 September 2011, No. 10-13911 : Dr. sociétés 2011, commentary 221, observations by S. Torck.
15 –
Court of Cassation, Commercial Chamber, 20 September 2011, No. 10-13591 – Court of Cassation, Commercial Chamber, 20 September 2011, No. 10-13878 – Court of Cassation, Commercial Chamber, 20 September 2011, No. 10-13911 : Dr. sociétés 2011, commentary 221, observations by S. Torck.
16 –
AMF, decision, 23 December 2008, SAN 2009-27.
17 –
The final paragraph of Article 221-1 of the AMF General Regulation provides that the rules concerning issuers’ periodic and ongoing disclosures laid down in that part of the Regulation (Arts. 221-1 to 223-38) also apply to the issuer’s executives.
18 –
Court of Cassation, Commercial Chamber, 19 December 2006, No. 05-18833, Vivendi : BJS May 2007, No. 149, p. 580, case note by C. Arzouze.
19 –
On this point, see: Paris Court of Appeal, 1st Chamber, Section H, 25 June 2008, No. 07/16197, Marionnaud: BJB December 2008, No. 60, p. 484, case note by J. Lasserre Capdeville.
20 –
On this point, see C. Ducouloux-Favard, Le Lamy Business Criminal Law, 2010, No. 1479; D. Martin et al., Market Abuse, 2nd ed., 2021, LexisNexis, p. 375, No. 327.
21 –
For a reminder of this situation, see, for example, AMF, decision, 6 April 2006, SAN-2006-25.
22 –
AMF, General Regulation, Art. 221-1.
23 –
Paris Court of Appeal, 1 Chamber, Section H, 13 September 2005, No. 05/04058.
st
24 –
Paris Court of Appeal, 5-7, 30 January 2014, No. 12/16612.
25 –
Paris Court of Appeal, 5-7, 30 January 2014, No. 12/16612 – AMF, decision, 16 July 2014, SAN-2014-15.
26 –
Y. Paclot, « Executives’ liability following the AMF’s blunder », RD bancaire et fin. 2007, p. 1.
27 –
AMF, decision, 24 May 2007, SAN-2007-18.
28 –
See, for example: AMF, decision, 28 February 2008, SAN-2008-12.
29 –
D. Martin et al., Market Abuse, 2nd ed., 2021, LexisNexis, p. 377, No. 330.
30 –
On this subject, see: E. Dezeuze, « Reflections on the criminal liability of legal entities in the context of market abuse », GPL 28 March 2023, No. GPL447l1.
31 –
Thus, a principal is exempt from liability if its employee acted outside the duties for which he was employed, without authorisation and for purposes unrelated to his responsibilities: Court of Cassation, Plenary Assembly, 15 November 1985, No. 84-12601 : Bull. crim., No. 358 – Court of Cassation, Plenary Assembly, 19 May 1988, No. 87-82654 : Bull. crim., No. 218.
32 –
A corporate officer incurs civil liability towards third parties if he commits a « fault of particular gravity, incompatible with the normal exercise of corporate duties »: see, for example, Court of Cassation, Commercial Chamber, 20 May 2003, No. 99-17092, B. In such a case, he cannot seek reimbursement from the company of compensation paid to the third party: Court of Cassation, Commercial Chamber, 18 September 2019, No. 16-26962, B : BJS January 2020, No. BJS120j9, case note by D. Poracchia.
33 –
Decision under review, paras. 55, 78, 97, 115, 135, 156, 180, 202, 222, 243, 266.
34 –
AMF, decision, 7 September 2023, SAN-2023-13, Rallye company and Mr X: BJB November 2023, No. BJB201n8, case note by F. Barrière.
35 –
Court of Cassation, Commercial Chamber, 20 May 2003, No. 99-17092 – see also Court of Cassation, Commercial Chamber, 1 December 2021, No. 19-25905 : BJS February 2022, No. BJS200s3, case note by A. Reygrobellet – Court of Cassation, Commercial Chamber, 7 September 2022, No. 20-20404 : BJS December 2022, No.BJS201m7, case note by J.-C. Pagnucco – Court of Cassation, Commercial Chamber, 21 September 2022, No. 20-20310 : BJS December 2022, No. BJS201n2, case note by B. Dondero.
36 –
See again: AMF, decision, 6 April 2006, SAN-2006-25, Company X and Mr A.
37 –
200 000 € for Visiomed, 650 000 € for and 350 000 € for the two executives.
38 –
Decision under review,p. 52.