(CN) – France did not violate George Soros’ rights by convicting him in 2002 of insider trading for ordering his hedge fund to buy shares in Societe Generale after learning of a takeover bid planned for the bank, the European Court of Human Rights ruled, 4-3.
“Soros was a famous institutional investor, well-known to the business community and a participant in major financial projects,” the court said in a statement accompanying the French ruling. “As a result of his status and experience, he could not have been unaware that his decision to invest” in Societe Generale risked violating insider-trading laws.
Since “there had been no comparable precedent, he should have been particularly prudent,” the court added.
Soros had maintained that he was innocent under French laws governing insider trading, which applied at the time only to employees of companies directly involved in a transaction.
The case began on Sept. 12, 1988, when French financier Georges Pebereau asked Soros to collaborate on a Societe General takeover. Soros declined to participate in the takeover attempt on Sept. 19, but his hedge fund, Quantum Endowment Fund, bought 160,000 shares of the bank for $11.4 million between Sept. 22 and Oct. 17.
Between Oct. 19 and 27, the fund sold off 95,000 of those shares. The takeover of Societe Generale became public knowledge on Oct. 28, and the fund had sold off the remaining 65,000 shares by Nov. 21, realizing a total gain of $2.28 million.
France’s stock market regulator, the Commission des Operations de Bourse, began investigating the case in 1989 but determined that French law, at that time, forbade trading on privileged information by employees of the concerned companies only.
In 1990 the law was revised to define and clarify the definition of “insider” to include third parties, like Soros, who gained privileged information outside their role in a participating company. In 2002, a French court convicted Soros of insider trading and ordered him to repay the gain that Quantum fund had made on its Societe Generale trades.
Soros has been appealing the conviction ever since. In 2007 an appeals court in Paris overturned the part of the conviction that applied to shares in the bank bought and sold on the London exchange and reduced the fine to only the amount Quantum gained trading on the French stock exchange.
The Court of Human Rights said Monday that government legislation is often written in general terms rather than “exhaustive lists,” and that well-informed professionals like Soros had a duty to be prudent in their work.
Each of the lower courts to hear Soros’ appeal had found that, even before the 1990 revision, the French law was “sufficiently precise” for Soros to have been aware that he should not have invested in Societe Generale shares after his contact with Pebereau, the court added.
Soros can still appeal to the human rights court’s Grand Chamber. If the chamber agrees to hear the case, a ruling could come in late 2012, 24 years after the trades that initiated the case occurred.