Publication date: May 05, 2025
EU and Polish regulations – practical aspects
The problem of conflict of legal interests in the context of capital market activity concerns the difficult balance between two fundamental obligations, which are provided for by separate legal regulations. The first of these obligations is the obligation to maintain professional secrecy, which includes the protection of confidential information, which is an important element of regulations concerning brokerage, advisory and financial institution operations. According to the provisions of capital market law, confidential information is such data that can significantly affect the price of financial instruments, and its disclosure or unauthorized use can lead to serious violations of the principles of fair trading on the financial market, as well as expose financial institutions and their clients to huge losses.
On the other hand, within the framework of stock exchange activity, the duty of loyalty to the employer or financial institution and the proper performance of entrusted tasks, assuming, among other things, the provision of reliable information to investors, clients and partners of financial institutions, is also important. This includes the obligation to provide information on an ongoing basis that may affect investment decisions. The purpose of these regulations is to ensure market transparency, equality of its participants and to prevent all forms of manipulation, including unfair practices that could distort competition and threaten market stability.
The conflict between these two obligations becomes apparent when a person with access to confidential information, such as a broker or investment advisor, is required to disclose it in order to perform duties related to loyalty to their employer or financial institution, for example in the context of informing investors about market conditions or important changes in companies. In such a situation, there is a conflict between the obligation to protect professional secrecy and the requirement to perform specific professional duties, which in practice can lead to ethical and legal dilemmas.
In the capital market, confidential information is of great importance because its unauthorized disclosure may threaten not only the interests of specific market participants but also undermine trust in the entire financial system. In turn, providing investors with full and reliable information about the market is essential to maintaining its transparency, preventing price manipulation and ensuring the fairness of transactions. When these two obligations overlap, a person making professional decisions in the capital market faces a dilemma as to which obligation should be treated as a priority.
The problem of conflicts of legal interests becomes even more complex when we consider the fact that in various situations and legal contexts it may be necessary to apply one obligation at the expense of another. That is why the provisions of capital market law have introduced special regulations that impose on capital market participants obligations concerning both the protection of confidential information and reliable information about the market situation. The need to comply with these principles requires a precise balancing of interests – the protection of confidentiality of data on the one hand, and the obligation to provide information to investors on the other, which may lead to difficult legal and ethical decisions.
This dilemma becomes particularly important in the context of liability for potential breach of these obligations. Disclosure of confidential information may entail serious legal consequences, both in the administrative and criminal sphere. In turn, failure to provide information to investors may expose financial institutions to civil liability and the risk of violating the rules of the capital market. Therefore, organizations operating on the capital market must develop procedures that minimize the risk of a conflict of legal interests and ensure compliance with applicable regulations, as well as maintain a balance between the protection of confidential data and the need to provide market information.
Professional secrecy and protection of confidential information
In accordance with art. 147 sec. 1 of the Polish Act of 29 July 2005 on Trading in Financial Instruments (Journal of Laws of 2024, item 722), persons performing activities related to trading in financial instruments are obliged to maintain professional secrecy as to information obtained in connection with the performance of professional activities. This obligation is of a permanent nature and does not cease with the termination of the employment relationship or the provision of services by a given person. Importantly, in accordance with sec. 2 of this provision, the secret may be disclosed only in cases specified in the Act or other legal provisions, in particular – at the request of the court, prosecutor’s office, Financial Supervision Committee or other authorized body.
In this context, professional secrecy has a dual function: protective (for clients and the interests of the financial institution) and systemic (to ensure stability and confidence in the market). Disclosure of information that is of significant importance to the financial situation of the issuer, its investment plans, strategy or legal situation may not only violate the interests of the client or company, but also disturb the equality of market participants.
In addition, professional secrecy often overlaps with confidential information within the meaning of EU law, which further tightens the legal rigors for its processing and disclosure.
Professional secrecy in its objective aspect refers to information related to the legal interests of persons (also referred to in the literature as “beneficiaries of professional secrecy”) who participate in activities related to trading in financial instruments or other activities conducted on the basis of the Act on Trading in Financial Instruments and subject to supervision by the Polish Financial Supervision Authority or relevant foreign authorities. Protection also covers data on activities undertaken as part of exercising this supervision and activities related to maintaining the register of shareholders. The concept of legally protected interest includes all interests secured by the provisions of various branches of law, in particular constitutional law – in the scope of protecting the rights and freedoms of an individual – and civil law, where both property and non-property interests are at stake, including personal rights.
Features of confidential information
One of the key attributes of confidential information is its potential impact on the formation of prices of financial instruments, i.e. its price-forming nature. According to the case law of administrative courts, price-forming information should be understood as information whose disclosure could significantly affect the value of financial instruments or derivatives related to them. This refers to a situation in which a rational investor, having access to such information, could make an investment decision based on it – regardless of whether this decision later turns out to be correct or brings the intended effect. In this context, it is not necessary to prove that the information actually changed the price of the financial instrument; the mere existence of the possibility of exerting such an influence is sufficient. This means that the potential ability of information to influence investment decisions makes it price-forming and subject to legal protection as confidential information. This criterion is objective in nature – it is based on the assumption of how an average prudent investor could react, and not on subjective expectations or effects of the actual disclosure of data.
It is particularly important that the assessment of the price-forming nature of a given piece of information should be carried out before its potential disclosure. It is the person or entity in possession of the information – before deciding to pass it on to others – who is obliged to make a reliable analysis of whether the given content may be considered confidential information in the light of the applicable regulations. The responsibility for the proper qualification of the information therefore rests with its possessor, who should adopt a cautious perspective – treating any questionable information as potentially confidential until it is proven otherwise.
In market practice, this means the need to implement appropriate internal procedures and training that will enable employees of financial institutions to properly identify confidential information. Failure to comply with this obligation, resulting in the unauthorized disclosure of price-forming information, may lead to serious legal consequences, both in terms of administrative, civil and criminal liability.
Confidential Information and the MAR Regulation
Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse introduced a uniform framework for the protection of confidential information throughout the European Union. Confidential information is a key conceptual category in the MAR Regulation (Market Abuse Regulation). Regulation ), which plays a central role in the regulation of capital markets in the European Union. Article 7 of MAR defines confidential information for the purposes of all MAR provisions, with the aim of establishing a uniform approach in the Member States, which is necessary in the context of the increasing internationalisation of financial markets and investor mobility. Confidential information is closely linked to the principle of transparency of the capital market, ensuring equal access to key data and protecting market participants from abuses.
The purpose of MAR regulation is to strengthen market integrity by reducing information asymmetry – a natural but harmful phenomenon of unequal access to information between market participants. Issuers who have knowledge relevant to the valuation of financial instruments are required to disclose it so that investors can make informed decisions. Lack of transparency would lead to serious market disruptions, price manipulation and loss of trust.
Equality of access to information is the foundation of an efficiently functioning capital market and the basis of its information efficiency. However, this principle is not absolute – MAR regulations provide for situations in which issuers may delay the disclosure of confidential information, provided that certain conditions are met. Despite certain limitations and difficulties in ensuring full effectiveness of the regulations, a uniform definition and uniform rules for handling confidential information contribute to increased transparency, investor protection and financial market stability in the EU.
Disclosure of confidential information under EU law
Under Article 10 of MAR, unlawful disclosure of confidential information occurs when a person with access to such information passes it on to someone else outside the normal performance of professional duties. EU regulations clearly emphasize that not every disclosure of confidential information is unlawful – exceptions are allowed, for example in the case of market research or passing on information to people who need it for their work. However, as a rule, such information should be protected until it is officially made public, and a violation of this principle disrupts equality of access in the financial market.
Disclosure of information is understood very broadly – it includes any way of transmitting content, regardless of the form or channel of communication. Whether the recipient is aware of the confidential nature of the information received is irrelevant. Legal disclosure of confidential information is only permissible when the transfer is absolutely necessary for the proper performance of the official duties of the person receiving the information. In practice, this requires careful determination of the relationship between the tasks performed and the need for access to information.
Proper management of confidential information also includes the obligation to protect it from access by unauthorized persons, both by the entity to which the information relates and by insiders . These principles are often reflected in internal regulations and agreements.
In the context of market research, disclosure of information is permitted provided that the recipient is informed in advance of the confidential nature of the information and their consent is obtained. If these procedures are not followed, market participants cannot benefit from the protection provided by MAR and may be liable for unlawful disclosure.
The perpetrator of unlawful disclosure can only be an insider, i.e. a person aware of the nature of the information being provided. Further provision of recommendations or inducing others to use confidential information can also be considered unlawful if the person providing it knew or should have known that it concerned confidential information.
In conclusion, it should be emphasized that MAR allows the transfer of confidential information before its official disclosure, but only within a strict professional framework and with the obligation to maintain confidentiality. In such cases, people with access to this information must be entered on a special insider list.
Information obligations
In the context of Article 17 MAR, the key issue is the principle of prompt disclosure of confidential information by issuers. The EU legislator uses the term “promptly”, which means that the information must be disclosed without undue delay, but not immediately. This means that although the information must be disclosed as soon as possible after it is identified, it is not required to be made public immediately. The law allows for a certain delay, taking into account the need to verify the information, its verification and possible technical procedures related to its publication.
In the past, under the repealed provision, the issuer was required to provide confidential information within 24 hours. The new provisions introduced a more flexible approach, where not only time matters, but also the quality and certainty of the information provided. Although sometimes the information is so predictable that it can be published immediately, the legislator does not expect immediate publication in every case. It is important that the reporting procedure takes into account all technical aspects, such as verification by decision-makers, as well as the operation of the information system, which may sometimes encounter faults or need updating.
Similarly, participants in the emission allowance market are required to effectively disclose confidential information, although the deadline for doing so is somewhat more flexible than for issuers. In addition, confidential information must be disclosed in a manner that ensures its rapid access and enables proper assessment by the public, preferably through officially approved systems, such as the ESPI system in Poland.
Another important element is the obligation to publish confidential information on the issuer’s website for at least five years, which allows investors to easily access historical data. However, the ESPI system ensures that information is transferred to the appropriate information agencies, which guarantees wide and free dissemination of information among investors.
Sanctions and liability for violations in the EU and Polish legal order
The regulations contained in the MAR regulation aim to strengthen supervision of the financial market, especially in the area of preventing abuse and ensuring transparency. The MAR preamble emphasizes that effective supervision of the Member States should be equipped with sanctioning tools that are inevitable and are intended to deter market abuse. Sanctions are intended to play a preventive role, preventing improper financial practices. In addition, MAR introduces minimum standards for the application of administrative sanctions, leaving Member States the possibility of introducing more stringent measures if they consider it necessary.
An important element of MAR is the principle of optionality of administrative sanctions in situations where the infringement of the regulations already involves criminal liability. This means that if a given offence has already been penalised at the level of criminal law, Member States are not obliged to apply administrative sanctions. However, if the infringement is not covered by a criminal sanction, appropriate administrative sanctions may be imposed. MAR also gives Member States the possibility to apply administrative and criminal sanctions in parallel, provided that the same infringement is not punished twice.
MAR also includes the introduction of a whistleblowing system to facilitate the detection of market abuse. This system is modelled on US solutions and aims to protect whistleblowers from retaliation by perpetrators. It also introduces incentives and protections for those who decide to report irregularities, which is intended to increase the effectiveness of supervision.
An important element of MAR regulations is also the obligation to publish decisions sanctioning violations, which is to increase the transparency of the financial market and strengthen the deterrent effect. The publication of these decisions is a means to inform the public about violations and penalties imposed on perpetrators, which affects compliance with the regulations by other market participants.
In turn, the regulations on administrative and criminal sanctions are intended to create a more coherent penal system in the European Union. This approximation is intended to improve the effectiveness of the fight against financial market abuse, as well as to ensure greater coherence in international sanctioning standards.
Although MAR focuses on administrative aspects, it does not ignore the civil consequences of market violations. In this respect, civil liability may arise from national laws, which gives market participants an additional tool to enforce compliance with the law. In turn, class actions can be an effective form of enforcement of capital market regulations.
Finally, the provisions of Article 30 of MAR contain basic principles regarding sanctions for financial market violations, including a minimum list of sanctioned offenses and the principles of optionality of administrative sanctions in the case of already penalized acts. It is also important to establish the level of administrative penalties, which are to effectively deter abuses, taking into account the economic aspects of these violations.
In turn, under national regulations, in accordance with Article 181 of the Act on Trading in Financial Instruments, disclosing information constituting professional secrecy to an unauthorised person constitutes a prohibited act for which a fine or even criminal liability under the provisions of the Penal Code may be imposed (if such information was used for the purpose of obtaining a financial advantage).
Consequences of a broker disclosing confidential information constituting professional secrecy in the case law of administrative courts
Cases (court rulings) VI SA/Wa 1334/15 and II GSK 3641/16 contain important theses concerning the consequences of violations by a securities broker, as well as the application of sanctions in such situations.
In the first case, case citation number VI SA/Wa 1334/15 ruling, the main issue is the disclosure by a broker of confidential information, constituting a professional secret, which is treated as a serious violation of the regulations regulating the capital market.
In this case, the court emphasized that a broker operating within the financial market is obliged to maintain confidentiality in relation to any information that may influence investors’ decisions. Disclosure of such information violates not only the provisions of civil law, but also the principles of professional ethics. In this situation, the ruling states that the broker not only violated the principles of confidentiality, but also violated the market’s trust, which poses a threat to the stability of the financial market. The court emphasized that such an offense cannot remain without appropriate consequences. For this reason, a person who discloses confidential information is exposed to a number of administrative sanctions, including the possibility of suspension or complete withdrawal of the right to practice the profession.
This ruling also raises a key issue related to the liability of a broker, not only in a professional context, but also in a civil one. Disclosure of professional secrecy may lead to claims from entities whose interests have been violated as a result of this act. The court indicated the possibility of seeking compensation from the broker by injured parties, as well as the consequences in the form of financial sanctions.
In the case of judgment II GSK 3641/16, the case concerned the suspension of a broker’s license to practice the profession as a result of a breach of the provisions regulating his professional activity. In this case, the court assumed that the sanction of suspending the license is justified in the context of a serious breach of the rules applicable in the broker’s profession. Suspension of licenses may be a decision applied by the supervisory body in the event of finding violations of legal provisions that affect the stability of the capital market or investor confidence.
In the discussed ruling, the court emphasized that the suspension of professional licenses is a deterrent action. The purpose of such a sanction is not only to punish the broker for the misconduct, but also to prevent similar cases in the future. The suspension of licenses is a form of protection of the public interest, because it is intended to maintain high ethical and professional standards among securities brokers.
It is worth noting that in this case, as in the judgment VI SA/ Wa 1334/15, the issue of balance between administrative liability and civil and criminal liability arises. In both cases, the court considered that a broker’s breach of professional duties entails consequences not only within the administrative sanctions system, but also in the context of potential civil claims and criminal liability, if the breaches were intentional or caused serious economic consequences.
From the perspective of a broader analysis, both rulings indicate the need to introduce effective and adequate mechanisms for supervision of brokers and a system of sanctions aimed at ensuring compliance with capital market law and protecting investors’ interests. Suspension of professional licenses and other administrative sanctions are instruments that are intended not only to punish, but also to prevent abuses on the financial market and maintain its stability. These actions emphasize the role played by ethical and legal standards in the profession of a securities broker, where every decision can have far-reaching consequences for both the market and the people involved in financial trading.
Conflict of duties – resolution
In the event of a conflict between the duty to perform official duties loyally and the duty to maintain secrecy and protect confidential information, the decision that gives priority to the latter is based on the fundamental principles of capital market law and professional ethics. In principle, the protection of the financial market and the prevention of abuses in securities trading are of paramount importance, and in this context the duty to maintain professional secrecy in the context of confidential information becomes a priority. This is not only a matter of compliance with the law, but also of ensuring fairness and transparency in the activities undertaken on the capital market.
Confidential information is crucial to the integrity of the financial market. Its improper disclosure can lead to serious disruptions in securities trading and also expose other market participants to financial losses. Furthermore, the disclosure of such information can be perceived as a form of market manipulation that undermines trust in the financial system. Hence, the protection of confidential information is one of the pillars on which the proper functioning of the capital market is based. Regardless of the professional situation, the obligation to protect this information is absolute, which means that in the event of a conflict with another obligation, it is this obligation to protect confidentiality that takes precedence.
If a person with access to confidential information discloses it as a result of carrying out an official order, they may be exposed to a number of sanctions. Although acting in good faith, in order to loyally fulfill obligations to the employer, may constitute a mitigating circumstance, it does not release that person from liability. An employee, regardless of intentions, must expect liability not only in the disciplinary sphere, but also administrative and criminal. In accordance with the provisions of capital market law, disclosing confidential information is treated as a serious breach of the rules, which may lead to supervisory actions and financial penalties, and in the case of more serious violations – also to criminal liability.
This liability is not dependent on the intention of the person disclosing the information, so even if such action was the result of an official order, it may result in the imposition of sanctions. Therefore, loyalty to the employer cannot be treated as a justification for acting contrary to the obligation to maintain professional secrecy. In the context of administrative and criminal law, sanctions for disclosing confidential information are intended to deter such practices, because acting to the detriment of the capital market may lead to serious disruptions in its functioning.
Administrative liability, on the other hand, may include the imposition of fines, and in the case of disclosure of information in a way that is particularly disadvantageous to the market, it is also possible to apply more severe measures, such as the suspension or withdrawal of a professional license. From a criminal law perspective, the disclosure of confidential information as a result of carrying out an official order may lead to criminal charges, especially in the context of provisions on financial market abuse, such as the use of confidential information for personal purposes or dishonest enrichment.
In connection with the above, organizations should pay special attention to internal mechanisms ensuring the protection of confidential information and instruct their employees on the responsibility related to disclosing such information. Appropriate procedures for protecting information, employee awareness of the risks related to disclosing professional secrecy, as well as developing clear rules of conduct in situations where there is a conflict between loyalty and the obligation to maintain confidentiality are crucial to ensuring compliance with legal regulations and maintaining credibility on the capital market.