The Securities Litigation Review: Italy


i Sources of law

The Italian legal framework relating to securities may be basically divided into European legislation, Italian primary legislation and Italian secondary legislation.

As far as European legislation is concerned, the following main sources are:

  1. Directive 2014/57/EU on criminal sanctions for market abuse (the Market Abuse Directive);
  2. Regulation (EU) No. 596/2014 on market abuse (the Market Abuse Regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC Text with European Economic Area (EEA) relevance;
  3. Directive 2014/65/EU on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU;
  4. Regulation (EU) 600/2014 on markets in financial instruments and amending Regulation (EU) No. 648/2012, as consequently supplemented by Commission Delegated Regulation (EU) No. 2022/446 of 17 December 2021 supplementing Regulation (EU) No. 600/2014 of the European Parliament and of the Council by specifying criteria for derogation from the principle that approved publication arrangements and reporting mechanisms are subject to supervision by the European Securities and Markets Authority; and
  5. Regulation (EU) 2017/1129 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC (Prospectus Regulation). This has recently been implemented and adapted in Italy by virtue of Legislative Decree No. 17, dated 2 February 2021.

The most relevant domestic law provisions are set forth by Legislative Decree 58/1998 (the Consolidated Law on Finance) and Legislative Decree 385/1993 (the Consolidated Law on Banking). A number of articles of the Italian Civil Code, Criminal Code and the Codes of Civil and Criminal Procedure are also relevant in this context.

Finally, some principles and guidelines for the application of the legislation on securities may be drawn from European and Italian case law, which may have a significant impact on the interpretation of the applicable laws and regulation, although in the Italian system precedents are not to be considered binding strictu sensu.

ii Regulatory authorities

The most important authorities in charge of the supervision of the market are: the Companies and Exchange Commission (CONSOB), the Bank of Italy and the Ministry of Economy and Finance. The Commissione Vigilanza sui Fondi Pensione (COVIP) and the Institute for the Supervision of Insurance (IVASS) are responsible for the supervising of pension funds and insurance companies respectively.

CONSOB is the supervisory authority for the Italian financial products market. CONSOB's aims are to protect investors and the efficiency, transparency and development of the market, and to ensure correctness in the conduct of business through the adoption of specific rules against intermediaries' wrongdoings and the enforcement of penalties set forth by the law.

The Bank of Italy is the central bank of the Italian Republic. It performs activities of general interest in monetary and financial matters, including risk containment, management and financial supervision of intermediaries, banks and financial institutions. Its supervisory role not only consists of remote control activities but also entails on-site inspection and ensuring the adoption of administrative measures (e.g., authorisations or penalties).

The Bank of Italy is also designated as the Italian authority empowered to apply the resolution tools and exercise the resolution powers in accordance with Article 3 of Directive 2014/59/EU, establishing a framework for the recovery and resolution of credit institutions and investment firms.

Among many other tasks, the Ministry of Economy and Finance is also responsible for outlining the requirements of competence, integrity and independence of, inter alia, the corporate representatives of intermediaries, security brokerage firms and asset management companies.

COVIP is the authority responsible for the proper and transparent administration and management of pension funds, also controlling the financial management of those funds.

IVASS is responsible for the management of insurance and reinsurance companies, for the transparency and fairness of the companies operating in the field and for the protection of policyholders and that of the consumers.

The Bank of Italy, CONSOB, COVIP and IVASS cooperate and exchange relevant information to facilitate each other's functions. In that respect, they cannot mutually oppose professional secrecy.

Banca Italiana S.p.A. is the authority responsible for the organisation and management of the Italian stock exchange.

Finally, the pivotal role of the civil and criminal judicial authorities must be considered in supervising and regulating the securities market due to the crucial part they play in the interpretation and application of the law.

iii Common securities claims

The Italian legal system provides investors with a number of claims primarily aimed at protecting them from any breaches of civil or regulatory obligations or failures to comply with criminal provisions (e.g., insider trading) on the part of market players.

The most common claims arising from securities offerings are caused by market players' breach of the information duties set forth by the law – such as false, inaccurate or omitted information in the prospectus (see Section II.i).

In general terms, security claims may be brought before ordinary civil courts or before public authorities. The heads of liabilities and the forms in which securities actions might be brought in those cases are discussed in greater detail in Sections II.i, II.ii, III.i and III.ii).

Private enforcement

i Forms of action

Security claims may be brought before ordinary civil courts. The relevant procedural traits are outlined below in Section II.ii.

The heads of liability of most security claims are as follows.

Liability for breaches of the rules of conduct imposed on financial intermediaries

In the context of their activity, financial intermediaries shall abide by the general principle of good faith, which constitutes a basis of the Italian legal framework governing contracts.

In addition, intermediaries shall comply with the standards of due diligence, fairness and transparency set forth by Article 21 of the Consolidated Law on Finance, and with the 'know your customer' or 'suitability' rules – as implemented by the subsequent CONSOB regulations – to protect the investor's best interests and to ensure that they are actually provided with adequate and correct information. As a consequence, financial intermediaries are to be held liable for damages occurring to the investor due to breaches of their obligations, either on a pre-contractual or contractual basis, depending on whether the damage arises before or following the execution of the relevant investment agreement.

Liability for wrongdoings by credit rating agencies

Pursuant to Article 35-a of Regulation (EC) No. 1060/2009 of the European Parliament and the Council of 16 September 2009 on credit rating agencies, as subsequently amended by Regulation (EU) No. 462/2013, rating agencies shall be held liable for the damages incurred by investors and issuers on the basis of a credit rating affected by the rating agency's gross negligence or wilful infringement.

Liability for the wrongdoings of directors

Pursuant to Articles 2395 and 2396 of the Italian Civil Code, directors or general managers shall be held liable for the damages incurred to shareholders and third parties as a consequence of their wilful misconduct or negligence.

The above claim may be particularly complex in terms of burden of proof, as the plaintiff is required to give evidence that the damage suffered is not a mere reflection of the damage suffered by the company (by way of example, the damage arising from the write-off of financial investment caused by the mismanagement conducts carried out by the administrative body).

Liability for the failure to propose mandatory takeover bid

Pursuant to Article 106 of the Consolidated Law on Finance, anyone who, following acquisitions or increased voting rights, has a 30 per cent shareholding or more than 30 per cent of the voting rights of a company, must propose a mandatory takeover bid to buy the entirety of the securities related to the same company admitted for trading on a regulated market. As a consequence, in the event of failure to propose the mandatory takeover bid, security shareholders may seek compensation for damages that, according to recent case law, shall be considered as contractual in nature (see Supreme Court, Judgment No. 20560/2015).

Prospectus liability

Pursuant to Article 94, Paragraph 8, of the Consolidated Law on Finance, the issuer, offeror or guarantor or any other person or entity responsible for the information contained in the prospectus, shall be held liable, within the limits of their duties, for the damages suffered by an investor who has reasonably relied on the truthfulness and completeness of the information contained therein.

In addition, pursuant to Article 94, Paragraph 9, of the Consolidated Law on Finance, liability for false information or omissions that are likely to influence the decisions of a reasonable investor may also lie with the intermediary responsible for the securities' placement. The issue of whether prospectus liability claims are contractual, pre-contractual or tortious in nature has been a much-discussed item among scholars and in case law. In this respect – although most recent decisions tend to recognise the tortious nature of prospectus liability – it is important to consider that the relevant framework provided by the Consolidated Law on Finance ultimately makes this debate less crucial, as it is expressly provided that (1) the statute of limitation is five years, which is typical of tortious claims; and (2) with regard to the burden of proof, the defendant is considered liable unless he or she proves that due diligence was adopted to ensure that the information was consistent with the real situation and did not contain omissions capable of affecting its meaning. Such shifting of the burden of proof is typically observed in contractual claims under Italian law.

Liability for the lack of diligence of the auditing companies

Pursuant to Article 15 of Legislative Decree No. 39/2010, auditing companies shall be held liable, jointly with the person in charge of the auditing activities, for the damages suffered by the commissioning company, their shareholders and third parties, as a consequence of their failure to observe due diligence in the execution of their duties.

Liability for the failure to perform the duty of supervision of the supervisory authorities

Supervisory authorities might be held responsible for the losses incurred by the investors also due to their failure to perform their duty of supervision. The authorities' liability is by nature in tort.

Depending on the circumstances, the claim may be brought by the claimant either on an individual basis or through a class action, which was introduced in the Italian legal system nearly 10 years ago. Pursuant to Articles 139–140 bis of the Consumers Code (Legislative Decree No. 206/2005), referred to in Article 32 bis of the Consolidated Law on Finance, consumers or users may collectively advance a claim if they hold homogenous positions with respect to the same offence carried out by the same enterprise.

Owing to the scarce use of class actions by Italian consumers in recent years, the Italian legislator recently intervened with a general and overall reform of class actions.

Articles 139–140 bis of the Consumer Code have been replaced by Law No. 31/2019, which entered into force on 19 May 2021, as set forth by Law Decree No. 137/2020, converted with amendments by Law No. 176/2020.

Among the most relevant amendments that the repealing act introduced in the class action regulation, it is worth mentioning that (1) both physical persons and companies are entitled to bring class actions claiming a breach of homogeneous individual rights; (2) both contractual and tort liability are enforceable through the new class action; and (3) from a procedural point of view, conduct of the action through the fast-track summary proceedings provided under Article 702 bis of the Italian Code of Civil Procedure has been introduced. Similarly, the new regulation shapes the class action on an opt-in based model.

For the sake of the clarity, it is worth mentioning that Italy will have to implement Directive (EU) 2020/1828 of the European Parliament and of the Council of 25 November 2020 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC by 25 December 2022. Therefore, it is likely that Law No. 31/2019 will be at least partially amended or integrated in order to have the provisions of the Directive transposed into the Italian judicial system.

ii Procedure

No special features exist in the Italian legal system for proceedings regarding security claims brought before the ordinary civil courts. The procedure set out by the Italian Civil Procedural Code shall apply.

Claims are handled by local courts in the first instance and the Court of Appeal in the second instance. Proceedings before the Supreme Court may be brought only with the limited scope of claiming a failure in the correct application of law by the lower courts.

Before commencing a security claim concerning insurance, banking and financial agreements, the parties shall start the mandatory mediation procedure pursuant to Article 5 of Legislative Decree No. 28, dated 4 March 2010. Such a step is held to be a procedural requirement; as a consequence, lacking fulfilment of the mediation stage, the judge grants the parties a 15-day compliance period.

If the mediation procedure is not successful or if the claim does not fall under the list provided by Article 5 of Legislative Decree No. 28/2020, the security claims shall directly follow the ordinary path set forth by the Italian Code of Civil Procedure.

Ordinary proceedings are commenced with the plaintiff serving the initial complaint upon the respondent at least 90 days prior to the proposed date for the first hearing (this term is extended to 150 days if the defendant is located outside the Italian Republic). The above term is mandatory, it being established by the Civil Procedural Code to put the defendant in a position to duly present its case.

After the first hearing, the judge issues the parties with deadlines to file the three briefs pursuant to Article 183 of the Italian Code of Civil Procedure, in which the parties can provide further consideration on the merits and evidence requests and form a reply, arguing any evidence.

Once the investigation phase is completed and the judge considers the case ready to be decided, the parties are granted 60 days and 20 days for the filing of the final briefs and reply briefs respectively. The judgment is then issued within the following 60 days.

Given the above, there are some peculiarities that should be taken into account when dealing with Italian law procedure.

First, based on the general principles governing evidence under Italian law, the burden of proof depends on whether the claim in question is contractual or tortious in nature.

If the claim is contractual in nature, while the plaintiff is only required to claim that the defendant has not complied with the agreement, the defendant shall give evidence that it has duly performed its obligations; on the other hand, should the claim be tortious in nature, the plaintiff shall be requested to prove:

  1. the wilful or negligent conduct of the defendant;
  2. the damage suffered; and
  3. the causal link between the conduct and the damage.

However, besides the general principles described above, specific burden of proof provisions might be provided by the applicable laws governing security claims. Such exceptions are based, to a large extent, on the proof–proximity principle, and tend to allocate the evidential burden to the party to whom the evidence is available or who is better situated to easily lead it. By way of example, so far as damages deriving from the failure to propose the takeover bid are concerned, the plaintiff shall not prove the causal link referred to under point (c) above, but will only be required to prove its security-holder status at the time when the takeover bid should have been proposed and the loss of profits arising from the failure to propose the takeover bid.

Second, under Italian law the statute of limitation is 10 years for contractual liability and five years for liability in tort. However, if the breach also amounts to a crime (e.g., insider trading or market manipulation) and the applicable criminal law provides for a longer statute of limitation, then the longer criminal statute of limitation shall apply to civil actions.

The statute of limitation period cannot be extended or shortened by the parties, but in some cases set forth by the law it can be suspended or interrupted by the interested party.

Third, no disclosure phase is provided for by the Italian procedural system. Parties are generally free to choose which documents they need to file within the proceedings for presenting their cases.

However (and although this can in no way be compared to the document production carried out under the disclosure phase of common law proceedings), Article 210 of the Italian Code of Civil Procedure provides that the judge, upon the request of a party, may order the other party or a third party to produce documents or evidence deemed necessary for the proceedings.

iii Settlements

Generally speaking, the Italian Code of Civil Procedure provides that the judge, upon joint request of the parties, or by his or her own motion, may summon the parties to encourage them to settle the dispute.

In addition, as mentioned in Section II.ii, claims concerning insurance, banking and financial agreements are subject to the mandatory mediation procedure, pursuant to Article 5 of Legislative Decree No. 28/2010.

Furthermore, alternative dispute resolution mechanisms are provided by the applicable legislation. To elaborate on this point, in 2009 the Banking and Financial Arbitrator was established at the Bank of Italy, which is responsible for litigation concerning operations or banking and financial services. Starting from 1 October 2020, disputes concerning the payment of a sum of money may fall under its jurisdiction within a maximum cap of €200,000.

The Banking and Financial Arbitrator operates through a board comprising five members: the President and two members chosen by the Bank of Italy, one by the intermediaries' associations and the last one by the associations representing the clients (business and consumers).

The decisions made by the board are not binding (as the judicial ones are), but the breach can be made public (e.g., on the Banking and Financial Arbitrator website). After the decision, the interested party may still resort to the ordinary court.

As of January 2017, retail investors' claims against intermediaries' breach of their duties of diligence, correctness, information and transparency in providing investment services or activities, may be brought before the Financial Disputes Arbitrator at CONSOB. The investor can file a petition with the Financial Dispute Arbitrator, if:

  1. he or she has already sent a complaint to the intermediary;
  2. the intermediary did not answer during the following 60 days;
  3. no more than a year has passed after the complaint under point a above;
  4. the requested amount by the intermediary is not higher than €500,000; and
  5. there are no other alternative dispute resolutions pending with regard to the same facts.

The Financial Disputes Arbitrator operates through a board comprising the President, nominated by CONSOB, and four other members, two of which are appointed by CONSOB and two by the most representative consumers and intermediaries associations. After the decision of the board, the interested party may still resort to the ordinary court.

In March 2020, the Bank of Italy and CONSOB signed a memorandum of understanding to ensure cooperation between the Banking and Financial Arbitrator and the Financial Disputes Arbitrator. In the implementation of the agreement between the Bank of Italy and CONSOB, the first forum was held in November 2021.

As far as legal fees are concerned, Ministerial Decree No. 55/2014 sets forth certain guidelines for the quantification of the fees in litigation cases on a claim value basis. In the case of a dispute settlement, the value of the claim to be taken into consideration to quantify the legal fees shall be the value initially specified in the claim and considered at the initial time of the dispute, and not the sum actually obtained by the client, as recognised by the Supreme Court recently (Judgment No. 20547/2019).

However, attorneys are free to agree with their clients fees that they deem more appropriate. Article 13, Paragraph 8, of Law No. 247, dated 31 December 2012, provides that in the event of settlement of a dispute by means of agreements made in any form, the parties shall be jointly and severally liable to pay compensation and reimburse expenses to all the lawyers engaged in the preceding three years and to outstanding creditors, unless they expressly waive the benefit of solidarity.

iv Damages and remedies

As a general rule, parties are allowed to seek compensation for the damages incurred. These damages should be calculated on the basis of the actual damage suffered, corresponding to the actual loss and loss of profit.

Punitive damages are not allowed in the Italian legal system. Nevertheless, a recent judgment of the Supreme Court (No. 16601/2017) ruled on the admissibility of the enforcement in Italy of punitive damages granted in foreign decisions, provided that the punitive damage cases are sufficiently predictable as well as the conditions in which it they might be awarded.

Apart from compensation for damages, parties can seek the following remedies:

  1. voidance of the contract in cases of defects affecting the structure of the agreement;
  2. annulment of the agreement in cases of fraudulent consent; and
  3. termination of the agreements in cases of breach of the obligations specified therein.

Public enforcement

i Forms of action

As mentioned above, security claims may also be enforced by public authorities. In this area, the most relevant actions are those that may be taken by CONSOB and by the public prosecutor.

According to the Consolidated Law on Finance provisions, CONSOB and the public prosecutor shall cooperate and exchange information to facilitate the ascertainment of the violations perpetrated by the market players, including those considered non-criminal.

It is not uncommon, for administrative and criminal actions commenced by a public body such as CONSOB on the one side, and the public prosecutor on the other, to overlap. In such cases, the Consolidated Law on Finance provides that the criminal proceedings shall not be suspended and both administrative and criminal financial penalties may be imposed upon the same party for the same violation within specific thresholds set forth by the law. Such a mechanism has raised some concerns in recent years in terms of compliance with the ne bis in idem principle, as also made clear by the ECHR (see decision Stevens v. Italia, dated 4 March 2014), by the Constitutional Court (see Decision No. 102, dated 8 March 2016) and by the Court of Justice (see Decision Nos. C-524/15, C-537/16 and C- 596/16 merged with C-597/16).

The debate that developed around this topic ultimately led to the amendment of certain provisions of the Consolidated Law on Finance. Indeed, Legislative Decree 107/2018 now provides that if a proceeding – either criminal or administrative – is followed by a subsequent proceeding against the same (legal or natural) person and concerning the same breach, then the penalty shall be imposed upon the offender taking into account the punitive measures already taken as a result of the first proceeding and, in any case, within the limits of the part possibly exceeding the measure already taken as a result of the first proceeding by the administrative authority or by the judicial authority, as the case may be.

However, it has been noted that for the time being the legislative authority has not yet taken into consideration the fact that the violation of the ne bis in idem principle may in theory occur not only in cases of overlapping penalties, but also in the event of two different proceedings against the same (legal or natural) person actually overlapping.

Nevertheless, it has subsequently been clarified that Legislative Decree No. 107/2018 constitutes only a minimum intervention on the Consolidated Law on Finance text, and a later improvement cannot be excluded.

ii Procedure

The proceedings before CONSOB commence with the serving by the authority of a formal notice upon the involved party. Such a notice shall be served within 180 days of the assessment of the violation (such a term is extended up to 360 days when the communication is to be served outside the Italian Republic). The notice shall contain, inter alia, a reference to the supervisory activity carried out by the authority, a description of the alleged infringement and an indication of the provisions allegedly breached along with the relevant penalties.

Within 30 days of receipt of the notice, defendants may file briefs, documents and applications to access the official file or to ask to be personally heard about the alleged violations.

The competent office shall analyse the documents and draft a final report on the matter, also proposing the nature and measure of the sanction or the dismissal of the charges, to be forwarded to the defendant and to a specific CONSOB commission.

The defendants may submit their own written counter-arguments to the commission in response to the report.

The proceedings shall be concluded within 200 days, running from the 30th day after the date that the formal notice is served. This term may, however, be suspended in certain cases.

The decision shall include the adoption of penalties, dismissal of the charges or a proposal to apply a sanctioning measure falling within the competence of another administration or authority. The penalty measure is then communicated to the defendant and an extract is publicised in the CONSOB Bulletin.

The penalty measure can be challenged before the competent Court of Appeal within 30 days starting from the communication of the measure, or 60 days if the applicant resides abroad. The decision of the Court of Appeal can be challenged only within the limited scope of the correct application of the pertinent laws before the Supreme Court.

In recent years, some concerns have been raised in terms of potential violation of due process and the rights of defence of the defendant within the context of the public enforcement conducted by CONSOB. In that respect, however, it has been noted that the rights of defence as set out by the Italian Constitution should only refer to the jurisdictional proceedings and not to the administrative ones carried out by independent authorities, such as CONSOB.

In 2016, a new CONSOB Regulation entered into force that apparently further safeguards the rights of the party under investigation. However, there are still some issues to be tackled. By way of example, after the preliminary ruling request submitted by the Italian Constitutional Court by order No. 117 dated 10 May 2019, the Court of Justice, by a judgment dated 2 February 2021, clarified that the nemo tenetur se ipsum accusare principle – according to which no one is bound to incriminate or accuse him or herself – may also be claimed in the administrative proceedings handled by CONSOB, if they may lead to the imposition of administrative sanctions of criminal nature or to criminal liability.

To illustrate the procedure of criminal claims, the first phase (the investigation phase) is handled by the public prosecutor with the supervision of the judge in charge of the preliminary investigation. The claims are then assigned to the judge in charge of the preliminary hearings and, lastly, to the court.

The criminal prosecution is commenced with the public prosecutor entering the offence in the register of suspected crimes, opening a file against the indicted person.

During the investigation phase, the prosecutor, in cooperation with the criminal police, carries out, under the supervision of the judge in charge of the preliminary investigation, the necessary verifications to establish whether any clues that may lead to the exercise of the criminal action actually exist. This phase is largely covered by secrecy, unless the prosecutor needs to carry out the 'guaranteed acts', which cannot be performed without the participation of the indicted person and a lawyer.

Once the investigation phase is closed, the public prosecutor may ask the judge in charge of the preliminary investigation to dismiss the case, or that the case is brought to trial if the public prosecutor deems it has sufficient evidence to support the accusation in front of the judge in charge of the preliminary hearing. The judge in charge of the preliminary investigation may uphold the dismissal request or ask the public prosecutor to uphold the investigation, or even order the public prosecutor to seek criminal trial.

If the public prosecutor, either upon its request or abiding by the order of the judge in charge of the preliminary hearing, proceeds with the trial, the person under investigation shall be notified and shall take part in the preliminary hearing.

At the end of the preliminary hearing, the judge may decide to bring the case to trial, where the case is decided either by a sole judge or by a court comprising three judges.

The decision may then be challenged before the Court of Appeal and the Supreme Court within the limited scope of the review of the application of the laws.

iii Settlements

The Consolidated Law on Finance provides that some particular breaches referred to in Article 194 quinquies may be extinguished by paying, within 30 days of the serving of the notice letter from CONSOB (see Section III.ii), a sum equal to twice the minimum amount of the edictal penalty set forth by the law. However, the same offender may not take advantage of this if he or she has already benefited from it in the previous 12 months.

As far as criminal proceedings are concerned, the Italian Code of Criminal Procedure provides the defendant with the possibility to reach an agreement with the public prosecutor, which may include the legal qualification of the conduct or the amount of penalties to be imposed. The agreement is then submitted to the judge presiding over the relevant phase of the proceedings and shall be considered as a standalone and overall proposal. The judge is granted significant powers, therefore, after reviewing the settlement reached in terms of, inter alia, adequacy of the penalty agreed therein, and on the legal qualification of the conduct he may dismiss the request if deemed inappropriate.

Note that the possibility to settle the criminal case has also been recently extended to the appeal phase. In particular, where the defendant has been convicted and has appealed the relevant decision, it may still reach an agreement with the public prosecutor and submit it to the judge of the appeal proceedings.

If a settlement is reached, the person possibly seeking damage compensation is entitled to commence civil proceedings. It is worth noting that, as the Italian legal system does not consider the settlement to be an admission of guilt of the judgment issued as a result of the plea bargaining procedure, case law has not yet taken a firm position on the probation value in compensation for damages in civil proceedings. However, the major guideline seems to be that of considering the settlement decision as an element freely appreciable by the civil judge. In this context, some rulings have gone so far as to affirm that, although the criminal judgment should be considered as an indication, the judge cannot disregard it without giving an explanation in the reasoning.

iv Sentencing and liability

The Consolidated Law on Finance provides for different penalties of criminal and administrative nature and sets forth the criteria to be considered to determine the type and the duration of the applicable penalties.

In particular, the competent administrative authorities (i.e., CONSOB or the Bank of Italy) shall take into consideration all the relevant circumstances, including, inter alia, the seriousness and length of the violation, the degree of liability, the extent of the advantage obtained, the prejudice caused to third parties and previous violations, if any.

However, in some specific cases regarding serious violations, such as insider trading or market manipulation, where penalties up to a maximum of €5 million may be imposed, the Consolidated Law on Finance establishes that the financial penalty may be increased by up to triple or up to 10 times the profit made or losses avoided as a result of the violation. Considering the aforementioned criteria and the entity of the profit of product of the offence, the standard financial penalties appear to be inadequate even when applied to the maximum.

As a general remark, the criminal court is allowed to apply the penalty in a discretionary manner, but taking into account some elements such as age or the significance of the offence, within the limits set by law and providing a reasoning along with the sentence.

With regard to the criminal penalties set forth by the Consolidated Law on Finance for insider trading and market manipulation, the above-mentioned law provides that the judge may increase the financial penalties – usually ranging from €20,000 to €3 million and €5 million respectively – up to three times or up to the greater amount of 10 times the product of profit obtained as a result of the offence, when, due to the seriousness of the act, the personal qualities of the offender or the amount of the profit or product obtained from the offence, the penalties appear to be inadequate even if applied to the maximum.

Cross-border issues

An action against a foreign issuer of securities may be brought before an Italian court by applying the provisions of Law No. 218/1995 (Italian private international law) or of EU Regulation 1215/15 (Brussels I bis Regulation) if the foreign issuer resides in another EU member state.

According to these provisions, foreign issuers may be sued before Italian Courts:

  1. by way of a choice of forum agreement (Article 4 of Law No. 218/1995; Article 25 of Brussels I bis Regulation);
  2. if the defendant has a registered office or a branch in Italy (Article 3 of Law No. 218/1995; Article 4 of Brussels I bis Regulation) and if the Brussels I bis Regulation applies;
  3. in matters related to tort, delict or quasi-delict, if the harmful event occurred or may occur in Italy (Article 7, Paragraph 3, of Brussels I bis Regulation); and
  4. in matters related to a contract, if the obligation in question had to be performed in Italy (Article 7, Paragraph 1, of Brussels I bis Regulation).

Year in review

In recent years, the relevance of and the attention to the security litigation field has increased. This consideration also derives from the transformed Italian economic scenario and from the growth of public listed companies.

Moreover, the establishment of the Banking and Financial Arbitrator and of the Financial Disputes Arbitrator has also granted minor investors the relevant dispute resolution tools.

From the 2021 analysis of the Banking and Financial Arbitrator, evidence shows a decrease in activity in the last trimester of 2021 compared to the last trimester of 2020. Indeed, the Banking and Financial Arbitrator received approximately 39 per cent fewer petitions compared to the previous year. The number of decisions rendered has decreased by 14 per cent, maybe because of the impact of the covid-19 outbreak in Italy, which has slowed down the course of judicial and non-judicial proceedings.

In fact, as far as civil and criminal procedures are concerned, during the course of the year, the covid-19 outbreak forced the Italian government to adopt measures providing for, inter alia, the suspension of civil and criminal proceedings from 9 March to 11 May, the postponement of all hearings after 11 May 2020 and the suspension of almost all procedural deadlines. Indeed, several measures for the management and rescheduling of hearings were adopted with the bid to ensure a smooth reorganisation of the courts' cases workload. In addition, a variety of provisions were aimed at fostering the use of alternative means offered by technology, in judicial and non-judicial proceedings, reshaping the ordinary procedure.

Until the end of the covid-19 related state of emergency, the activity of the judiciary was managed mainly through virtual and written hearings and remote judicial activities, according to the provisions set by Article 221 of Law Decree No. 34, dated 19 May 2020, converted by Law No. 77/2020, and Article 23 of Law Decree No. 137, dated 28 October 2020, converted by Law No. 176/2020, extended by Law Decree No. 228, dated 30 December 2021, converted by Law No. 15/2022. Please note that at the time of writing, the state of emergency and the relevant restrictions have been lifted by the Italian government.

On 25 November 2021, the Italian Parliament approved Law No. 206/2021, which came into force on 24 December 2021, whereby some provisions of the Italian Code of Civil Procedure were amended, and the government has been delegated to adopt one or more implementation legislative decrees for the reform of civil justice by December 2022. The aim of the reform is to simplify and reduce the duration of the procedures – which is also one of the duties undertaken by the Italian government in the context of the Recovery and Resilience Plan – to improve the electronic court filing system, to use certified email as a means of service of process and to boost the use of track summary proceedings. It may therefore have a positive impact on securities civil litigation and on the settlement of relevant case law.

Outlook and conclusions

In conclusion, although the covid-19 outbreak has slowed down the overall judicial and non-judicial procedures over the past few years, many reforms have been and are being implemented. Hence, we remain positive about the fact that improvements are being achieved in the securities litigation field.


1 Daniele Geronzi, Stefano Parlatore and Daria Pastore are partners, and Bianca Berardicurti is a counsel at Legance – Avvocati Associati.

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