‘Typicity’ and determinability of administrative offences established in the Securities Code (CdVM)
Principle of legality
Principle of the subsidiarity of the punishment
RULING No. 85/12
15 of February of 2012
The Constitutional Court’s jurisprudence has constantly emphasised that the administrative offence and the criminal offence possess different natures, that the degree of the legal reproof and the material sanctions in each of the two domains are also different, and that these differences justify the fact that the principles which guide penal law are not automatically applicable to the law governing mere administrative offences.
The Securities Code (CdVM) norm which says that the communication or disclosure by any person or entity and by any means of information that is not complete, true, up-to-date, objective and lawful is a serious administrative offence does not breach any constitutional principle or norm.
The Constitution subjects the Criminal Law to the principle of “typicity” (the principle that criminalising penal norms must adequately typify the crimes they establish), and to the requirement that such norms must clearly determine what conduct is criminalised (in the criminal domain, the requirement of determinability is one of the dimensions of the principle of legality), all in advance. However, this principle and requirement do not extend to the law governing administrative offences.
Similarly, the principle of the subsidiarity of the punishment, in the sense that the latter must always be the ultima ratio, is only valid in penal law. Where the law on administrative offences is concerned, it is only possible to talk about unconstitutionality in cases where the legislator has been clearly guilty of excess, in that it has provided for sanctions which are unnecessary, inappropriate or manifestly and evidently excessive.
In an administrative-offence case, the Stock Market Commission (CMVM) decided to order a bank to pay various fines for infractions regarding the communication or disclosure of information that was not complete, true, up-to-date, objective and lawful – infractions that are provided for in the CdVM. This decision was confirmed by the Lisbon Court of Appeal, whereupon the bank in question appealed against the latter’s ruling to the Constitutional Court.
The appellant in the present case argued that the CMVM had breached both the “typicity” dimension of the principle that sanctions must be provided for by law, and the constitutional principles that a punishment must be necessary and proportional, and of equality.
The Constitutional Court began by contextualising this norm. It noted that the CMVM is a public administrative entity whose fundamental role is to make every effort to ensure the proper operation of the stock markets, both at the level of the primary market (the issue of securities), and at that of the secondary market (the free exchange of securities that have already been issued). It is equipped with public administrative powers (particularly powers to regulate, supervise and inspect, which include the procedural treatment of administrative offences and the imposition of the respective fines). Entities that act in a professional or qualified capacity in the stock markets are subject to regular monitoring by the CMVM and are under a legal duty to provide this supervisory body with all the cooperation it asks them for. In particular, they are under a duty to provide information, which must be “complete, true, up-to-date, objective and lawful”.
The Constitutional Court took the view that it is a mistake to extend requirements that apply under the penal law to the administrative-offence domain.
Quite apart from anything else, the differences between the two domains manifest themselves in the administrative (and non-jurisdictional) nature of the entity that imposes administrative-offence sanctions, and in the requirement for the determinability of the type of crime that is a key feature of penal law, but does not operate in the administrative-offence domain.
The Court said that the norm before it must be analysed in conjunction with the CdVM provision on the type of information at stake (information regarding financial instruments, organised forms of trading, financial intermediation activities, the settlement and clearing of operations, public offers of securities, and issuers) and on the means by which it is provided (any means of disclosure, even if the information is included in advice, recommendations, advertising, or risk-rating reports), as well as with the norm that lays down the upper and lower limits on the fines that are applicable to the respective administrative offences. The concept of ‘information’ for the purposes of the CdVM cannot be considered vague – on the contrary, it is perfectly circumscribed.
It is not constitutionally illegitimate to configure a type of administrative offence that sanctions a form of conduct, regardless of the damaging effects that this configuration may have on the legal assets it is designed to safeguard. The Constitution does not prohibit the creation of administrative-offence infractions that are purely formal or simply refer to the mere undertaking of an act, which is in itself enough to characterise the type of offence, regardless of whether or not it has any actual external consequences. Concretely with regard to the stock market, an administrative-offence intervention that imposes sanctions before and irrespective of whether any damage is done is fully justified, because the protection of the assets in question does not have to refer to damage that has actually been caused or injuries that have actually taken place. In this type of market it is very often difficult to identify damage, most of which is diffuse in nature; and when it is possible to identify the damage to the market, as a rule that damage is already irreparable and uncontrollable. Besides this, unlawful practices are normally accompanied by the generation of a chain of economic effects that go beyond the simple space in which the securities in question circulate. With a market that is as fast and sensitive as this one, there can be no doubt that any danger already constitutes a moment at which effective damage not only exists, but goes on feeding investor distrust. It is therefore acceptable for the CdVM to sanction the simple breach of duties to inform, and any lack of accuracy in that information.
The Court said that the norm which was the object of the present appeal should also be read in conjunction with the CdVM norm which sets the lower and upper limits on the sanctions for administrative offences that are qualified as ‘very serious’: 25,000 and 2,500,000 Euros. Given that in another of its provisions the CdVM also sets out the criteria for determining the exact amount of the fine – namely the concrete unlawfulness of the fact, that of the blame on the part of the agent, the benefits obtained, the requirements to prevent the fact, and whether the agent was a natural or a legal person – it is not possible to consider that the maximum and minimum limits are such as to violate the principle of the norm’s determinability. The fine is concretely determined by weighing up the circumstances that are expressly mentioned in the law, between the established minimum and maximum limits. The persons and entities at which the norm is directed are thus perfectly able to know what forms of conduct are prohibited, and also to foresee the sanction that would be imposed on the corresponding unlawful behaviour. This is what the necessary determinability of types of administrative offence consists of. The Court felt that it was important to remember that its own jurisprudence means that setting broad limits for sanctions in the administrative-offence domain does not in itself constitute a breach of constitutional principles, and that it is necessary to determine whether the law lays down other mechanisms which help ensure legal security.
The administrative offence in question is intended to safeguard the value of the truth and transparency of the stock market – a value that is undeniably important. The reliability of information is a fundamental pillar of the proper operation of the stock market, and one which makes it possible to ensure that investment decisions are fully informed. Ensuring the transparency and reliability of information is an essential need. The financial market and system warrant constitutional protection. One of the priority tasks with which the Constitution charges the state is that of ensuring the markets operate efficiently, and within that context, particularly repressing practices which injure the general interest. It is also a constitutional requirement that the financial system be structured by law, in such a way as to ensure that savings are constituted, invested and secure and that the necessary financial resources are dedicated to the development of the economy and society. The operation of the stock markets is a specific instrument that serves to further the state’s economic development. What is at stake here are on the one hand supra-individual legal assets that are employed in an economic development programme, which is why the Constitution concerns itself with protecting the markets; and on the other, the property rights of savers, investors and the clients of financial institutions. The requirement to provide information is thus the result of a complex set of interests, particularly with regard to the protection of investors, who are acting within the context of a market characterised by a high level of risk and who must be provided with a system in which opportunities are equal. The administrative offence involved in the present case is also intended to protect individual rights, such as the citizen’s right to the protection of his/her assets.
So the question here is not just one of constitutional values linked to financial stability and economic and social development, but also the protection of the rights of savers, investors and the clients of financial institutions, and first and foremost their right to property.
In order to safeguard these constitutional values, the legislator opted to establish sanctions that would effectively prove dissuasive.
See Rulings nos. 344/93, (12-05-1993), 278/99 (05-05-1999), 160/04 (17-03-2004), and 537/2011 (15-11-2011).