This morning, the hearing on the Elliott case is taking place before the Paris Court of Appeal. Elliott was fined 20 million euros by the Financial Markets Authority (AMF) sanctions committee in April 2020. This emblematic case provides an opportunity to assess the recent evolution of AMF jurisprudence. In 2020, the sanctions committee rendered 13 decisions, eight of which were appealed (four before the Conseil d’Etat and four before the Paris Court of Appeal), four involved incidental appeals, and one involved a principal appeal by the president of the AMF. Appeals of decisions by the AMF sanctions committee are brought before the Conseil d’Etat for cases of an administrative nature (banks, members of regulated markets, investment service providers, financial investment advisors, breaches of professional obligations, etc.), and before the Paris Court of Appeal for all other cases.
Contradictory jurisprudence
This duality of appeal jurisdiction is a source of concern. “Since 2008, the Conseil d’Etat has considered that in cases of market manipulation by a trader, the bank is presumed responsible unless it proves that it has implemented measures to prevent any breach,” recalls Martin Le Touzé, partner at Herbert Smith Freehills. However, in March of last year, in the Morgan Stanley case, the Paris Court of Appeal dismissed this argument regarding a foreign bank and attributed the breach committed by its agent to the bank. How can these contradictory jurisprudences be reconciled? What will be the outcome on other subjects in the future?
For disputes related to financial institutions, harmonization is necessary. Indeed, appeals of decisions by the ACPR are heard before the Conseil d’Etat, while appeals of customer disputes are heard before a civil court. “In recent years, increasingly different interpretations of the same texts between regulatory authorities and judicial authorities have put banks in a conflict of duties,” notes Julien Martinet, partner at Hogan Lovells. “We are educating civil judges, who cannot deny, for example, that a bank may be subject to foreign regulation and that they must take this into account.”
Increasing Severity
Sanctions “continue to increase in terms of severity and amount,” notes Jean-Charles Jaïs, partner at Linklaters. The trend is expected to continue upward, but we will not reach the ceilings in the short term. After the record €35 million fine imposed on Natixis in 2017, reduced to €20 million by the Conseil d’Etat, could the AMF be tempted to reach the €50 million threshold? “For the credibility of the French regulator at the European and international levels, the AMF will sooner or later be required to use all its means of action; its ceiling is €100 million,” recalls Martin Le Touzé.
Recently, the stock market watchdog has made efforts to better justify the quantum of sanctions. It “formalizes more the elements taken into account: seriousness of the offense, gain generated, contributive capacity of the respondent, etc.,” notes Jean-Charles Jaïs.
Moreover, the rapporteur of the sanctions committee demonstrates independence. “His opinion regularly differs from that of the AMF College. As for the sanctions committee, it no longer hesitates to sanction beyond the proposals of the College,” notes Jean-Charles Jaïs.
Appeal courts, particularly the Conseil d’Etat – which notably doubled the fine against an analyst to €200,000 in 2019 – no longer hesitate to increase pecuniary sanctions. “We cannot hide this new risk from our clients, which is accentuated by the multiplication of incidental appeals, especially from the president of the AMF,” confides Martin Le Touzé. “But we still lack a clear framework for calculating the sanction.”
The Paris Court of Appeal, following the sanctions committee, is hardening its positions. It also seems “more inclined to reform, in whole or in part, the decisions of the AMF’s sanctions committee, and appears more sensitive to European law and the need, where necessary, to question the CJEU,” continues Jean-Charles Jaïs. Courts of appeal, notably the Court of Cassation, “could in my opinion ask more preliminary questions to the CJEU on the interpretation of the Market Abuse Regulation (MAR),” adds Martin Le Touzé.
Divergent views on procedure
This difference in perspective between the AMF and the appeal courts also affects the substance of the cases. “While the appeal courts are interested in procedural aspects, the AMF almost systematically rejects them,” notes Martin Le Touzé. “The Marie Brizard ruling of the Court of Cassation on October 14, 2020, supports the rights of defense by specifying that the documents of a person passing through a searched place could not be seized, thus limiting the investigative powers of the AMF.”
“On the other hand, the AB Science decision of the Court of Cassation on November 4, 2020, caused concern,” continues the lawyer. “The Paris Court of Appeal had paved the way in 2019 for emails where the lawyer is the sender or recipient not to be seized by the AMF, as they are covered by attorney-client privilege, even if other correspondents – potentially having the status of third parties – are recipients or senders of the email. However, this decision was overturned. This reinforces the idea of the AMF that guilt evidence is found in emails.”
Furthermore, the scope of regulatory authorities tends to expand rather than contract. Following its 2019 report on stock market cybercrime, the AMF has started to conduct spot checks, anonymously publishing conclusions that have led to follow-up letters. “Will the next step be sanctions?” wonders Julien Martinet. “Too much regulation slows down the market, and out of protection concerns, financial institutions may refuse to continue exercising the riskiest activities.”
