AMF calls for imposition of €20m fine on Elliott
Bruno de Roulhac
The tension was palpable this morning before the Enforcement Committee of the Autorité des Marchés Financiers (AMF). The stock market watchdog has called for the imposition of a record fine of 20 million euros on the activist fund Elliott for an inaccurate statement on the nature of the financial instruments acquired during the takeover bid of the American XPO Logistics on the French transporter Norbert Dentressangle in 2015, for late communication of its declaration of intent, and for breaches committed during the investigation.
“I feel a very deep sense of discomfort. There is an atmosphere of discrimination and undisguised hostility." It was with these words that Elliott's barrister, a star of the Paris commercial bar, Jean-Pierre Martel, partner at Orrick, began his oral arguments, recalling that the rapporteur of the Enforcement Committee had found that no harm had been caused to the market.
In detail, the AMF accuses Elliott of declaring positions as CFD (contract for difference) with settlement in cash when the transactions concerned equity swaps. Since the Hermès-LVMH case, the law requires the declaration of ownership of derivative instruments, and the ad hoc form of the AMF requires clarification of the nature of these instruments. Although for the AMF this form has a legal basis, for the defence, no law imposes this requirement. Elliott also recalled that it has always responded to requests from the AMF.
The AMF also accuses Elliott of not immediately declaring its intention to tender its securities or not, in accordance with the regulations. Elliott responded that it could not make a declaration when it only held derivatives, and then when it acquired “hard” securities, it was unable to make a declaration until its decision had been made. The AMF specified that the declaration of intent must be immediate, even if the declarant subsequently changes its intent. The defence then questioned the relevance to the market of such a declaration which can be modified at any time.
Finally, the stock market watchdog accuses Elliott of a breach for failing to provide all the requested information in due time. The defence countered that it can only provide an accurate reply to a specific question. Elliott's defence considered that by failing to submit one, the AMF demonstrated "a will to discredit us".
If the Committee follows the recommendation by the College, this fine would be on the same level as the 20 million euro fine imposed on Morgan Stanley last November, and previously on Natixis. For the latter, the initial fine of 35 million euros in 2017 was reduced to 20 million euros by the Council of State last November.