MAJOR DEFEAT FOR DUTCH AUTHORITY ON FINANCIAL MARKETS (AFM) IN CASE RELATED TO INSIDER TRADING
Directors of a fund manager lost job fully unnecessary
On 12 September 2006, the Dutch Trade and Industry Appeals Tribunal (‘College van Beroep voor het bedrijfsleven’), a special administrative court based in The Hague which rules on disputes in the area of social-economic administrative law, nullified several decisions of the Dutch Authority on Financial Markets (‘Autoriteit Financiële Markten’; AFM) in a case initiated by two former directors of a large fund manager.
AFM, the body supervising a.o. fund managers, in 2003 decided that both directors had to step down on the ground that they had violated insider-trading rules. However, after a 3-year long fight the court ruled that both directors did not have knowledge of material non-pubic information at the time they traded in securities. Thus the directors lost their job without any wrongdoing at all.
The court considered that it had asked AFM to further substantiate its decisions already in 2005, which AFM just didn’t. AFM refused to carry out a careful investigation into the facts. According to the court, AFM’s decisions were taken using a lack of sound reasoning and AFM did nothing to repair this.
It is expected that AFM, which violated its duty of care, will face a compensation claim for financial loss incurred by both directors. The directors were represented by Guido Roth of Spigthoff Attorneys & Tax Advisers.
Karel Frielink
Attorney (lawyer) / Partner
