Background
In 2020, a company listed on the Bolsa de Madrid failed to disclose, within the required timeframe, material inside information that subsequently had a measurable effect on its share price when it eventually became public. The delayed disclosure came to light following a review by the Comisión Nacional del Mercado de Valores (CNMV), the Spanish securities market regulator, which identified that the issuer had withheld information it was required to release under Article 17 of the Market Abuse Regulation (MAR). MAR applies uniformly across EU-listed companies, and the obligation to disclose inside information to the public as soon as possible is one of its central requirements.
An institutional investor based in the Netherlands had held a significant position in the issuer's shares throughout the period between when the information should have been released and when it was. Investment decisions had been made on the basis of a share price that did not reflect the issuer's true position. When the disclosure was finally made, the price corrected materially. The investor sustained a quantifiable loss.
The investor's legal advisers assessed the factual record and identified a well-founded damages claim under Spanish civil law, supported by the MAR disclosure framework and the investor's rights under the Spanish Securities Market Act (Ley del Mercado de Valores). Spanish courts have jurisdiction over claims against Spanish-listed issuers, and the Juzgados de lo Mercantil handle securities litigation of this kind.
Why Funding Was Necessary
The investor's board was persuaded of the legal merits but not of the internal case for funding proceedings unilaterally. Retaining specialist securities litigation counsel in Spain, commissioning an event study economist to quantify the price impact of the disclosure failure, and preparing for the issuer's anticipated challenge to both the materiality of the withheld information and the loss causation methodology represented a substantial multi-year cost commitment.
The investor was also aware that other institutional and retail investors had suffered comparable losses during the same period. A coordinated approach would reduce costs and potentially support a more efficient resolution, but organising that process across a dispersed claimant group added further complexity that the investor was not equipped to manage without external support.
Rook Radcliffe Partners' Assessment and Funding Structure
Rook Radcliffe Partners received the case summary in early 2021. The review focused on three issues.
Liability
The CNMV's findings substantially reduced the contested ground on the disclosure obligation itself, though the precise timing of when the information crossed the threshold of inside information under Article 7 of MAR remained a live issue that the issuer was expected to contest. The investor's legal team had prepared a credible analysis on this point.
Loss Causation and Quantum
The investor's preliminary event study isolated the price movement attributable to the disclosure from other market movements during the same period. Rook Radcliffe Partners required a more granular analysis of confounding factors before committing capital and instructed an independent financial economist to review the methodology during formal due diligence. That review supported the preliminary findings with minor adjustments.
Claimant Group Development
Rook Radcliffe Partners assessed whether a coordinated multi-investor approach was viable given the profile of the affected investor population and the procedural options available under Spanish law. The assessment concluded that a structured coordination of institutional claimants, pursued in parallel proceedings before the Juzgados de lo Mercantil in Madrid, was the most effective route to recovery.
A term sheet was issued following the initial assessment. Formal due diligence concluded within seven weeks. The LFA was executed in mid-2021.
Proceedings and Resolution
Proceedings commenced before the specialist commercial courts in Madrid. The investor group, which expanded during the early stages of the litigation as additional institutional claimants were identified, was represented by Spanish securities litigation counsel working alongside the investor's Dutch advisers.
The issuer contested both the materiality of the withheld information and the loss causation analysis. Those defences were addressed through expert evidence at the hearing stage. Following an extended period of written pleadings and two substantive hearings, the parties entered settlement discussions.
A negotiated settlement was reached in the second half of 2022, providing a recovery for all participating claimants calculated on a per-share basis relative to each investor's holding during the relevant disclosure period. The settlement was agreed without admission of liability by the issuer, which is the standard position in securities litigation settlements of this kind.
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