An important application should be made as soon as the litigation is launched; it will be for an injunction pursuant to Section 55 of the Company Law Enforcement Act 2001.
If successful, it will preserve the assets, for the benefit of the plaintiffs, of any director or officer of the company who is a defendant in the proceedings.
Under the Market Abuse (2003/6/EC) Regulations 2005 it is an offence to breach the regulations by engaging in the acts set out in Regulation 5. It provides:
5. (1) Subject to paragraphs (4) and (5) and Regulations 8(2) and (4) and 9(1), a person to whom this paragraph applies who possesses inside information shall not use that information by acquiring or disposing of, or by trying to acquire or dispose of, for the person’s own account or for the account of a third party, directly or indirectly, financial instruments to which that information relates.”
To understand this it is necessary to look at the definition of Insider information and market manipulation:
“inside information” means –
(a) information of a precise nature relating directly or indirectly to one or more issuers of financial instruments or to one or more financial instruments which has not been made public and which, if it were made public, would be likely to have a significant effect on the price of those financial instruments or on the price of related derivative financial instruments,”
“market manipulation” means –
(a) transactions or orders to trade —
(i) which give, or are likely to give, false or misleading signals as to the supply of, demand for or price of financial instruments, or
(ii) which secure, by a person, or persons acting in collaboration, the price of one or several financial instruments at an abnormal or artificial level,
unless the person who entered into the transactions or issued the orders to trade establishes that the person’s reasons for so doing are legitimate and the transactions or orders to trade, as the case may be, conform to accepted market practices on the regulated market concerned,”
Unless the transaction whereby Sean Quinn’s CFD position was “unwound” (whatever that means) is justifiable by reference to legitimate reasons or accepted market practices, then the transaction appears to have been in breach of Regulation 5 (1) of the Market Abuse (2003/6/EC) Regulations 2005.
There is a potential remedy (under Section 33 (1) of the investment Funds, Companies and Miscellaneous Provisions Act 2005), accruing to any aggrieved shareholder to recover, in a derivative action, any profit made by a party or parties to the transaction.
Of course, given that the major benefit of Sean Quinn’s CFD interests was to avoid reporting his stake-building to the regulator, and given that Anglo Irish Bank knew or learned of his interests (as did the Central Bank, the Regulator, the Taoiseach and the Minister for Finance), the very interesting question is this; who were the “vendors” of the 10% of the shares of Anglo Irish Bank?
Or the 15%, for that matter?
What was the size of that profit?
To whom did it accrue?