The Court of Justice of the European Union (CJEU) ruled on 3 June that qualified investors can also hold Bankia (now part of CaixaBank) liable for inaccuracies contained in the brocure for its IPO in 2011, as it did not reflect the bank’s accounting reality.
The case pits Bankia against Unión Mutua Asistencial de Seguros (UMAS), a qualified investor who participated in the bank’s IPO and subscribed to a purchase order for 160,000 shares at a price of 3.75 euros per share. UMAS seeks a declaration of nullity on the grounds of error of consent in the purchase of shares and a declaration of Bankia’s liability in the alternative for lack of truthfulness in the prospectus for the issue.
It does not cover only retail investors
The Supreme Court asked the Court of Justice of the EU whether the prospectus liability action covers both retail and qualified investors when addressed to both, or only retail investors.
The judgment determines that, in the case of a public offer for subscription of shares addressed to both retail investors and qualified investors, the action for liability for the information contained in the prospectus “does not cover only retail investors but also qualified investors”. The CJEU therefore considers that it is legitimate for institutional investors to be able to rely on the information contained in the prospectus, which is presumed to be “complete” and “reliable”. Even so, the court also concludes that the EU directive does not preclude the provisions of Spanish law that allow the judge to take into consideration the fact that an investor could or should have more information in addition to the information made available to all potential purchasers.
The European judges argue that “it cannot be deduced” from the EU directive that qualified investors “do not have the possibility of bringing an action for liability” because, in the case of a mixed offer, all investors to whom it is addressed “regardless of their status, have that document, which allegedly contains complete and reliable information that it is legitimate to invoke”.
Thus, as long as there is a prospectus, “it should be possible to bring a civil liability action for the information in the prospectus, regardless of the status of the investor who considers himself to have been harmed”.
The EU Court of Justice upholds Spanish rules that allow a judge to take into account whether a qualified investor “has or should have knowledge” of the financial situation of a listed company “on the basis of his relations with the company and outside the prospectus” and even “obliges the judge to take that fact into account”.
However, it adds that this is possible as long as it does not result in “less favourable” treatment than “similar” actions under national law “and does not have the practical effect of making it impossible or excessively difficult to bring an action for liability”.
The Luxembourg decision constitutes a new setback for Spanish case law, which mostly considers that the profile of the investor is relevant in order to pass judgement, in the sense that if an investor has knowledge, he or she should know the real situation of Bankia. However, the objective fact is that Bankia’s IPO prospectus was inaccurate and, therefore, it does not matter what type of investor you are since you have based your decision on false information.