The European Insider Trading Regulation after the ECJ’s Spector Photo Group Decision

Abstract:     
Securities laws around the world agree that purchasing or selling financial instruments in possession of non-public, price-relevant information does not by itself constitute insider dealing. However, requiring more than the knowing possession of such information while trading – e.g. requiring some kind of fraudulent intent – might impede the effectiveness of any insider trading prohibition. Therefore, securities laws worldwide have to answer the question what exactly constitutes the mens rea requirement of insider trading. In a recent preliminary ruling, the European Court of Justice (“ECJ”, the “Court”) answered this question for the EU insider trading prohibition in Art. 2(1) of Directive 2003/6/EC (“Market Abuse Directive”, “MAD”). After discussing the factual background and reasoning of the decision [I)], this article provides an assessment from a comparative and methodological perspective, arguing that the Court should have exercised more judicial self-restraint [II)1) and II)2)]. It concludes with a summary of the most important dogmatic questions raised by Spector [II)3)].

Number of Pages in PDF File: 21

Keywords: insider trading, insider dealing, market abuse, securities regulation, ECJ, EU-Law, Spector

JEL Classification: K22

Accepted Paper Series