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Financial markets: the Supreme Administrative Court (SACL) has referred to the Court of Justice of the European Union (CJEU) for a preliminary ruling on questions relating to EU rules prohibiting insider trading on a regulated market.

On 6 November 2024, the Extended Chamber of Judges of the Supreme Administrative Court of Lithuania (SACL) decided to refer to the Court of Justice of the European Union (CJEU) for an interpretation of certain provisions of the Market Abuse Regulation (Regulation (EU) No 596/2014).

This ruling was issued in the context of a dispute concerning a decision of the Bank of Lithuania imposing a fine of EUR 200,000 on the applicant, an investment firm registered in Estonia, for breach of the prohibition on insider dealing in securities under the Market Abuse Regulation.

Specifically, the infringement was established on the basis of the finding that the applicant, acting for the benefit and in the interests of its client, and knowing inside information relating to the client's intentions regarding the price of the issuer's shares to be sold outside the regulated market (which was below the market price), had executed an order by the client to sell a part of those shares on the stock exchange at market price.

Following doubts and uncertainties as to the interpretation and application of the provisions of the Market Abuse Regulation, the Advanced Chamber of Judges stayed the proceedings and asked the CJEU for clarification:

1. Is Article 9(2)(b) of the Market Abuse Regulation to be interpreted as meaning that the execution by an investment firm of an order by a client to sell securities (shares) on a regulated market on the basis of a normal service contract cannot be regarded as exceeding the performance of normal duties merely because (i) that he (i) provides services to that client on the basis of another contract in the process of the sale of those securities (shares) outside the regulated market and (ii) is therefore aware of inside information about the client's intentions (determination) as to the price of the securities (shares) sold outside the regulated market?

2. Are Articles 8(1), 9(2)(b) and 14(a) of the Market Abuse Regulation to be interpreted as meaning that a person referred to in Article 9(2)(b) of the Market Abuse Regulation may (not) be held by the competent authority to have infringed the prohibition laid down in Article 14(a) of the Market Abuse Regulation where, on the basis of a contract concluded with a customer, that person trades in securities with the sole intention of executing an order placed by the customer, irrespective of whether the customer placed the order on the basis of insider knowledge, within the meaning of Article 8(1) of the Regulation?

3. Is Article 9(6) of the Market Abuse Regulation to be interpreted as meaning that it is sufficient for the competent authority to rely solely on the presumption referred to in recital 24 of that regulation in order to find that the reason for the placing of an order by a client for the sale of securities (shares) on a regulated market to an investment firm referred to in Article 9(2)(b) of the Regulation is unlawful in the context of the question of whether the investment firm (brokerage firm) should be declared to have infringed Article 14(a) of the regulation?

4. Is Article 8(1) of the Market Abuse Regulation to be interpreted as meaning that the restrictions laid down therein may (not) be applied to the trading on a regulated market of the shares of an issuer by a person who has a holding in the capital of the issuer at the market price of the shares of that issuer on the market, simply because that person has already decided (freely) on a specific, but not yet publicly disclosed price for the shares of the issuer to be sold in a proceeding which is being conducted off the market, and the start and expected end of which has been made known publicly?

5. Are Recital 24, Article 8(1) and Article 14(a) of the Market Abuse Regulation to be interpreted as meaning that the person referred to in the second subparagraph of Article 8(4) of the Market Abuse Regulation is a person who, on the basis of a contract, has executed a client's order for the sale of part of a security (shares) on a regulated market, in order to rebut the presumption of market abuse set out in recital 24, must (i) prove that his client did not carry out the acts referred to in Article 8(1) when giving the order, or (ii) it is sufficient to prove that he did not carry out the client's order because of his insider knowledge?

Administrative Case No. eA-128-822/2024.