EU court rules journalist justified in sharing 'inside information' with sources

Mail journalist cleared of insider trading after sharing market rumours with sources

journalist inside information - Stock market

A Mail journalist who shared inside information with sources in the course of writing a market rumours column was justified in doing so, a European court has ruled.

The journalist had been fined by the French Financial Markets Authority for sharing with two of his regular sources that he planned to write about the rumours, which related to the launch of takeover bids for listed companies.

The Court of Justice of the European Communities, which ensures EU law is interpreted the same way across the union, has now ruled that what he did was lawful as it was necessary and proportionate in the course of his reporting.

The judges said: “…a disclosure of inside information by a journalist is lawful where it must be regarded as being necessary for the exercise of his or her profession and as complying with the principle of proportionality.”

The ruling is a rare reminder that what journalists do in the course of their reporting can land them in court, just as the final published product can.

The judgment said that in order to benefit from the journalistic exemption a journalist must act in compliance with their relevant rules or codes, for example IPSO’s Editors’ Code of Practice, Impress’s Standards Code or a self-regulated title’s own code where relevant.

However, compliance with the code does not in itself mean that the disclosure of inside information was “proportionate”, the judgment added.

Greg Callus, a media law barrister at 5RB, told Press Gazette: “Most liability in media law, both criminal and civil, attaches to what is ultimately published. But when it comes to non-public ‘inside information’ that could be relevant to markets or financial instruments, there is serious risk of liability just from disclosing information to sources as part of the reporting process.

“This is a really important decision on the care that needs to be taken in that context. All journalists should note that the CJEU says expressly that compliance with professional rules and codes will not alone guarantee that any such disclosure was necessary and proportionate.”

A spokesperson for IPSO, the UK’s largest press regulator, pointed to Clause 13 in the Editors’ Code which says journalists should not pass financial information they receive in advance of publication to others “even where the law does not prohibit it”. The Editors’ Code of Practice Committee has also produced best practice guidance on market abuse regulations.

The case related to a journalist known only as Mr A and two articles published in 2011 and 2012 on Mail Online.

The articles each mentioned possible takeover bids, one for the shares of luxury goods company Hermès and one for energy giant Maurel & Prom. The shares of each went up the day after the articles were published.

The French Financial Markets Authority, Autorité des marchés financiers (AMF), found that in both cases British residents made purchase orders for shares shortly before publication which were sold after the articles went live.

In 2016 the AMF accused Mr A of disclosing the information to two sources in breach of its insider trading rules. In 2018 he was fined €40,000 after the agency’s Penalties Commission decided he was responsible for disclosing inside information.

The new judgment looked at the question of whether information relating to the upcoming publication of a press article reporting a market rumour about an issuer of financial instruments constitutes “inside information” under Article 1 (1) of the Directive 2003/6 of the European Parliament and Council on insider dealing and market manipulation.

The legislation defines inside information as information “of a precise nature” that, if it were made public, would be likely to have a significant effect on share prices.

The court decided that the information shared by the journalist – that an article would be appearing in the press in relation to the particular market rumours – was able to constitute inside information of a precise nature.

The reputation of the journalist and media organisation as reputable would add to this conclusion, “since investors may… be led to presume that [the rumours] come from sources considered to be reliable…”

However the judges went on to conclude that Article 21 (Unlawful disclosure of inside information) of the European Parliament and Council’s Regulation No 596/2014 on market abuse “must be interpreted as meaning that the disclosure by a journalist, to one of his or her usual sources of information, of information relating to the forthcoming publication of a press article authored by him or her reporting a market rumour is made ‘for the purpose of journalism’… where that disclosure is necessary for the purpose of carrying out a journalistic activity, which includes investigative work in preparation for publication”.

This is because, although journalistic work ultimately aims to provide information to the public, the disclosure of information in the context of a journalist’s investigative work in preparation for publication may also “constitute a disclosure of information for the purpose of journalism”. The judges said account must be taken of the need for the journalist to verify the information they have heard.

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