Short Reads

No exemption to the prohibition of market manipulation

No exemption to the prohibition of market manipulation

No exemption to the prohibition of market manipulation

06.04.2017 NL law

Market abuse cases are relatively rare in the Netherlands. Recently, the Trade and Industry Appeals Tribunal (College van Beroep voor het bedrijfsleven) confirmed that the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten, the "AFM") rightfully concluded that a trader manipulated the market by securing the price of financial instruments to an abnormal or artificial level.

The judgment of the Tribunal of 22 February 2017 can be found here (in Dutch only).

Background

A trader participated in 44 auctions to buy shares of small cap fund New Sources Energy N.V. (ticker: NSE, "NSE"). The auction took place twice a day. Rule in the auction was that the auction price would be the price for which the highest number of shares could be traded. The trader entered his bid in the auction seconds before the close of the auction for a high price. In 37 of the 44 auctions, for the trader succeeded in increasing the price by an average of 9.9%. Interestingly, the investors account of the trader was linked to the share price of NSE. The higher the share price on a day, the higher the credit would be that the trader could use with its bank.

The AFM imposed a fine of €100,000 on the trader for violating the prohibition on market manipulation. The District Court of Rotterdam upheld the decision of the AFM.

The Tribunal judgment

The Tribunal also upheld the decision of the AFM that it was the intention of the trader to manipulate the share price, since a higher share price would lead to the availability of a higher credit amount with the trader's bank. The fact that the trader did not otherwise profit from his actions, is irrelevant. The trader could not sufficiently prove that his actions were legitimate and in accordance with the use of accepted market practices.

The judgment illustrates that there is a higher risk for traders who cannot provide a convincing explanation of their behavior that meets the open norms of manipulative behavior. This is even more the case if this trader profits from his behavior. The judgment also shows that, although not statutory required, the intent of a person can be relevant to assess whether a trader manipulated the market and that relying on exemptions is difficult.

Team

Related news

13.11.2019 NL law
A new Act on the Supervision of Trust Offices

Articles - Roderik Vrolijk and Soeradj Ramsanjhal published an article in the Dutch Financial Law Review as a follow-up on their article two years ago in the same journal. The authors specifically shed light on the customer due diligence and open norms of the new Act on the Supervision of Trust Offices 2018, that entered into force on 1 January 2019. 

Read more

31.10.2019 NL law
EBA Publishes Follow-Up Report on 2018 FinTech Roadmap

Short Reads - Building on its 2018 FinTech Roadmap, the EBA has issued a report focused on potential impediments to the cross-border provision of banking and payment services. In the 29 October 2019 report, the EBA identifies three regulatory areas in which the further integration of European banking and payment services markets can be improved.  The three areas the EBA addresses are authorisation and licensing, conduct of business and consumer protection requirements, and anti-money laundering ("AML") and countering the financing of terrorism ("CFT").

Read more

08.11.2019 BE law
Interview with Wouter Ghijsels on Next Gen lawyers

Articles - Stibbe’s managing partner Wouter Ghijsels shares his insights on the next generation of lawyers and the future of the legal profession at the occasion of the Leaders Meeting Paris where Belgian business leaders, politicians and inspiring people from the cultural and academic world will discuss this year's central theme "The Next Gen".

Read more

07.11.2019 NL law
Banking & Finance 2019 Second Edition – The Netherlands and Luxembourg chapter

Articles - Maarten de Bruin, Rein van Helden, Rogier Raas and Robert Steeg have all contributed to the Chambers and Partners Banking & Finance 2019 Second Edition, providing the Netherlands chapter. The Luxembourg chapter was written by Gérald Origer, Jean-Marc Delcour, Steven Paridaens and Nicolas Pradel.

Read more

17.10.2019 NL law
Objective indicator high-risk third countries repealed as of 18 October 2019

Short Reads - The Implementation Decree for the Wwft 2018 has been amended. As a result, as of 18 October 2019 institutions subject to the Dutch Anti-Money Laundering and Anti-Terrorism Financing Act will no longer have to report transactions solely on the basis that this transaction relates to an individual residing, or a legal entity having its registered office in, a high-risk third country.

Read more

Our website uses functional cookies for the functioning of the website and analytic cookies that enable us to generate aggregated visitor data. We also use other cookies, such as third party tracking cookies - please indicate whether you agree to the use of these other cookies:

Privacy – en cookieverklaring