ON SECONDARY INSIDER TRADING AND THE OVERCOMING OF THE PROHIBITION OF PRAESUMPTUM DE PRAESUMPTO.

In the context of financial markets, insider trading is the abuse of privileged information by individuals who, thanks to their role or position, have access to confidential information and unlawfully exploit an information advantage to make a profit, violating the principle of equal access to information that should characterize financial markets.

 

In the last years, attention has also shifted to more subtle and indirect forms of market abuse, such as so-called secondary insider trading, which involves individuals not directly linked to the privileged information but who can benefit from an illegal information chain.

 

More specifically, secondary insider trading consists of a transaction in financial instruments carried out by someone who, although not directly associated in the issuer, is nevertheless in possession of inside information and uses it to gain financial advantage.

 

While primary insiders have access to privileged information because of their direct role within the issuer, for example as executives, secondary insiders, on the other hand, become aware of it indirectly, for example through a primary insider who discloses it to them.

 

From a regulatory perspective, secondary insider trading is governed by Article 187-bis of the Consolidated Law on Finance (TUF), which provides for administrative fines for the abuse of inside information and the unlawful disclosure thereof. This provision is coordinated with Article 14 of Regulation (EU) No. 596/2014 (Market Abuse Regulation – MAR), which explicitly prohibits the use, unauthorized disclosure, and attempt to recommend or induce others to use inside information.

 

With judgment no. 14273 of 2025, the Second Civil Section of the Supreme Court returned to address the issue of secondary insider trading, emphasizing the need for a rigorous, unified, and comprehensive assessment of the evidence to support the judge's decision. In this context, the Court reiterated the principle that it is not permissible to base a presumption on another presumption, referring to the prohibition of the so-called “praesumptum de praesumpto”.

 

In the case in question, CONSOB, with Resolution No. 20754 of 2018, supplemented by Resolution No. 20870 of 2019, following suspicious transactions carried out by an individual shortly before the publication of sensitive company information, imposed an administrative fine on the latter for violation of Article 187 of the Consolidated Law on Finance (TUF) for secondary insider trading.

 

The agent was accused of using inside information allegedly communicated by the wife of the head of the Organization Development Department of Italcementi Spa to purchase 2,000 Italcementi Spa shares on July 27, 2015.

In particular, according to CONSOB’s reconstruction, the two were friends, and in the days leading up to the purchase of the shares, there had been frequent contacts between them, including a phone call on July 23, 2015, likely followed by a face-to-face meeting.

 

For this reason, the investigation carried out by the authority was based on a set of presumed indications, such as the timing of the transactions, personal ties, and access to information.

The Brescia Court of Appeal, in its ruling of December 5, 2019, upheld the appeal filed in the insider trading case. According to the judges, the information relating to the planned sale of 45% of Italcementi Spa by Italmobiliare to HeidelbergCement, transmitted by the wife of the head of the Development and Organization Department of Italcementi Spa to the appellant, was to be considered privileged.

 

However, the Court ruled that it was not necessary to prove that the information had been passed directly from the person who held it to the person who used it and that the inferential reasoning on which the sanction was based was incorrect, as the evidence was disconnected in time (diachronic) and based on assumptions not supported by adequate logical or regulatory rules.

 

In particular, it found unconvincing the hypothesis that the Italcementi executive had learned the news at work and then indirectly passed it on to the appellant through his wife, based on the assumption that those who work in a large corporate environment are automatically aware of the rumors circulating.

 

CONSOB appealed against the ruling of the court of second instance to the Supreme Court, citing four grounds for appeal. According to the Supreme Court, the court of second instance had erroneously considered it necessary, in order to establish insider trading, to prove that the information had been communicated, when it would have been sufficient for the person using it to have possessed it.

 

The mere possession of the inside information should therefore have led the Court of Appeal to consider the alleged offense to have been committed, without having to prove the specific transfer of information from the Italcementi executive to his wife and from her to the potential secondary insider.

 

Furthermore, the Supreme Court found that the Court of Appeal had erroneously excluded the offense by arguing that the sanctioning decision was based on a double presumption (the principle of praesumptio de praesumpto), contrary to the case law of the Court, which instead admits this form of evidence in the presence of serious, precise, and consistent evidence.

 

The Supreme Court has clarified that there is no absolute prohibition on double presumptions, and that a fact established by presumption may well constitute the logical basis for a further inference, if the evidence is serious, precise, and consistent. 

 

In essence, if a fact has been established through presumptions based on serious, precise, and consistent evidence, that same fact can be used as a starting point to construct a further presumption aimed at establishing an unknown fact.

 

There is therefore no logical or legal obstacle to the use of “chain” presumptions, provided that each step of the inference is well founded.

The Supreme Court also added that, rather than talking about an absolute prohibition of double presumption, one should talk about the insufficiency of the degree of probability underlying the logical inference: what makes double presumption inadmissible is not the presumptive structure itself, but the insufficiency of the elements on which it is based.

 

In conclusion, the judgment in question represents an important clarification on the subject of secondary insider trading and the use of presumptions in proceedings. With this judgment, the Court  reiterated that it is not necessary to prove the exact origin of the privileged information in order to establish the agent's liability, as it is sufficient to prove, even through presumptions, that the agent was in possession of it.

 

Similarly, the idea of the prohibition of double presumptions, as affirmed by the Brescia Court of Appeal, has been overcome on the assumption that it is not the structure of presumptions that is prohibited, but their probative weakness.

 

 Authors: Avv. Gianfilippo Chiricozzi e Matteo Carusi