Right to silence for individuals charged with market abuse offences

In a recent judgment (case C-481/19, Consob), the Court of Justice of the European Union (“CJEU”) has recognised for the first time that individuals subject to an administrative investigation for insider dealing cannot be penalised for refusing to provide answers to the competent authority when their answers might establish their liability for an offence punishable by administrative sanctions of a criminal nature or their criminal liability.

This preliminary ruling case concerns Directive 2003/6/EC and Regulation No 596/2014, both on market abuse, which provide that administrative sanctions must be determined for failure to cooperate in an investigation. In accordance with these provisions, the Italian financial markets authority, Consob, had imposed an additional penalty of EUR 50,000 on an individual, who had committed an administrative offence of insider dealing, for his failure to cooperate during the investigation since he had postponed the date of his hearing several times and had eventually refused to answer the investigators’ questions.

The CJEU recalls that the right to silence is protected by Articles 47 (fair trial) and 48 (presumption of innocence and right of defence) of the Charter of Fundamental Rights of the European Union and is recognised by the European Court of Human Rights, in its case law on the right to a fair trial.

Pursuant to the CJEU, this right to silence is not confined to statements of admission of wrongdoing or to remarks which directly incriminate the person questioned, but rather also covers information on questions of fact which may subsequently be used in support of the prosecution and may thus have a bearing on the conviction or the penalty imposed on that person.

However, the right to silence recognised in market abuse proceedings is limited to natural persons and does not protect legal entities. Furthermore, this right to silence cannot justify every failure to cooperate with the competent authorities, such as a refusal to appear at a hearing planned by those authorities or using delaying tactics to postpone it.