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Supreme Court of Denmark

Market manipulation 

Case no. 54/2016

Judgment delivered on 14 November 2016

The Prosecution Service

Publication of stock market announcement containing incorrect and misleading information regarded as market manipulation in contravention of the Securities Trading Act, s. 39(1), cf. s. 38(1)(1), cf. now s. 15, cf. article 12(1)(c) of the Market Abuse Regulation and s. 3 of the Penal Code

In a stock market announcement on 3 February 2010, company T announced the result of a clinical study of the company's pharmaceutical product. The study was to form the basis of a marketing authorisation. According to the stock market announcement, the primary endpoint of the study had been met, but this was not correct. After the announcement, the share price quickly rose from DKK 85 to DKK 224, with a resulting DKK 2 billion increase in the company's market value.

Referring to the High Court's findings of fact, the Supreme Court based its decision on the fact that T's CEO knew that the primary study analysis had failed, that the information in the announcement was incorrect and misleading, and that the indication that the primary endpoint had been met could have an appreciable effect on the price of the company's shares.

T had, among other things, claimed that, according to the legislative history behind s. 38 of the Danish Securities Trading Act, it is a condition for finding the company guilty of market manipulation that the company had intended to affect the price of its shares when it published the information in the announcement.

The Supreme Court noted that according to s. 38(1)(1) of the Securities Trading Act, market manipulation covers acts that are likely to influence the price of securities in a direction deviating from their value on the market through dissemination of information likely to give false or misleading signals as to, among other things, the price of securities,  This provision also applies to issuers and, according to its wording, it does not require mens rea. This means that a party may also be convicted of market manipulation if the provision was violated by negligence, cf. s. 19 of the Danish Penal Code. The Supreme Court held that the reference in the legislative history to an issuer's failure to disclose inside information only amounting to market manipulation in serious cases where the aim was to affect the price cannot be taken to cover cases where the issuer acts to disseminate false or misleading information in violation of the provision.

The Supreme Court found that this case was not covered by s. 94(1), second sentence, of the Securities Trading Act, cf. now s. 299 d(1)(1) of the Penal Code on aggravating circumstances. The Supreme Court did not find sufficient grounds to reduce the fine imposed nor to increase the sentence.

The Supreme Court thus affirmed the judgment of the High Court.

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