In this case, the AMF Board (Collège) had brought charges against the two defendants, the listed company Rallye, parent company of Casino, and its CEO at the time of the events, Mr. Hattab, for dissemination of “false or misleading information likely to fix the Rallye share price at an abnormal or artificial level“. The Enforcement Committee upheld all the notified grievances (I), considered that the CEO was also liable thereof (II) and imposed high penalties (III).

I. The Enforcement Committee considered that Rallye’s financial communications in 2017 and 2018 constituted market manipulation by dissemination of false or misleading information likely to fix Rallye’s share price at an abnormal or artificial level

The Enforcement Committee considered that Rallye had disseminated false or misleading information which gave investors a more favorable image of its liquidity situation than it truly was, in particular by describing this situation as “solid” or “very solid“, whereas its liquidity situation was dependent on the Casino share price, which was highly volatile and subject to persistent downward pressure.[1]

The Enforcement Committee decided that, on 11 occasions and in 14 different communication media between March 2018 and May 2019, Rallye’s communication regarding its liquidity situation had constituted market manipulation in breach of Articles 12.1, c), 12.4 and 15 of the MAR Regulation.[2]

Pursuant to Article 12.1, c) of the MAR Regulation, the communication at stake met the 4 criteria of market manipulation which are[3]:

• Dissemination of information;
• The false or misleading nature of this information;
• The fact that they must fix or be likely to fix “at an abnormal or artificial level the price of one or more financial instruments“;
• Knowledge, proven or supposed, of their false or misleading nature on the part of the respondent.

Firstly, it was not disputed that all the documents in question had been distributed and contained the disputed information criticized in the statements of objections.[4]

Concerning the false or misleading nature of this information, the documents published by Rallye incorrectly presented its liquidity situation as “solid” or even “very solid“, based on more than 1.7 billion euros of “confirmed and unused” credit lines at the end of 2017 and in the first half of 2018, and 1.3 billion at the end of 2018.[5] However, the full amount of these lines was not available, especially as the cash collateral mechanism in place was likely to result in a significant reduction without this being brought to the attention of investors.[6]

This information was considered misleading by the Enforcement Committee, as it contributed to giving investors a more favorable image of Rallye’s liquidity than was truly the case.[7]

In addition, the Enforcement Committee found that the information at stake was likely to set “at an abnormal or artificial level the price of one or more financial instruments“[8], at a higher level than it truly was[9], even though liquidity risk was the financial risk to which Rallye was most exposed due to its debts and maturities to be honored, and this aspect was the focus of investors’ attention.[10]

Lastly, the Enforcement Committee found that Rallye knew or should have known that the information published was erroneous, in that “the issuer is responsible for information published in its name and on its behalf by one of its bodies or representatives“[11], in this case its CEO Mr. Franck Hattab.

II. The Enforcement Committee found the CEO liable for market manipulation

The Committee found that, in its capacity of as CEO and head of financial communications at the time of the events, Mr. Franck Hattab was also liable for these market manipulations, pursuant to article 12.4 of the MAR Regulation.[12]

Based on this Article, the Enforcement Committee can sanction any natural person who takes part in the decision to carry out activities on behalf of the legal entity at stake.[13]

In particular, the Commission noted that Mr. Franck Hattab was CEO and was responsible for financial communications throughout the period of the wrongful communications. He was in charge of the company’s financial communication and, as such, “knew, or at least should have known, that the information disseminated by Rallye concerning its financial situation was false or misleading“.[14]

As a result, according to the Enforcement Committee, Mr. Frank Hattab qualified as a natural person taking “part in the decision to carry out activities on behalf of the legal entity concerned within the meaning of Article 12.4 of the MAR Regulation“, so that “Rallye’s breaches of the provisions of Articles 12.1, c) and 15 of the MAR Regulation in connection with the information it disseminated between March 8th, 2018 and May 15th, 2019 are consequently attributable to Mr. Hattab on the basis of Article 12.4 of the same regulation“.[15]

III. High financial penalties justified by the repetition of the facts at issue and the damage caused to investors

The Enforcement Committee imposed a substantial fine of 25 million euros on Rallye and 1 million euros on its former CEO.

In particular, the Committee noted the seriousness of these breaches, given the repeated dissemination of false or misleading information, the fact that they concerned the most central aspect of the company’s business, and the fact that the AMF’s Deputy Secretary General had already drawn the company’s attention in 2016 to the quality of its financial communications and, in particular, its presentation of liquidity risk.[16]

The Committee also noted that, although no losses suffered by third parties had been estimated, Rallye’s breaches were likely to have caused significant harm to investors, who were unable to assess and anticipate Rallye’s risk of default.[17]