The Grifols case: how do investors protect themselves? | Business

The stock market earthquake caused by the fall of the Catalan colossus Grifols on the Ibex 35 has become the victims of shareholders. Funds and banks, as well as individuals who had invested their savings in the pharmaceutical company’s shares, saw the value of their shares plummet overnight after suspicions arose that the company was hiding some poufs under the rug in its accounts. Charges that have not been proven and on which the National Securities Market Commission (CNMV), the stock market police body, has yet to rule.

However, at such a crossroads, if it is confirmed that a multinational corporation is hiding some accounting corpse, it is worth asking what legal lifeline investors can cling to. There are several ways to file a claim, although history shows that the road to recovery court is full of potholes.

Let’s start with the fact that the Securities Market Law offers two options. Firstly, Article 38 opens up the possibility of claiming compensation for “false information or omission of relevant particulars from the prospectus”, that is, from the document that serves as a guide for investors in secondary markets.

Secondly, Article 104 makes administrators liable if station information does not give a “true view of the assets, financial position and results of operations of the issuer.” The Grifols case fits into this scenario, according to allegations from the Gotham City Research bear fund.

Isn’t it time to knock on the doors of the court? Not so fast, experts say. It is advisable to be patient before moving your court case. And above all, wait for the CNMV to come to power. That’s the advice of Fernando Gavín, a partner at Gavín & Linares Abogados, one of the firms that is already studying the implications of the pharmaceutical company’s case and exploring future steps in court.

If the CNMV concludes that the Catalan multinational’s accounts are distorted, investors will have free rein to file complaints. They can demand a refund of “the difference between the amount paid and the actual value of the shares,” Gavin explains. Thus, if the Spanish control body says its value is zero, as Gotham claims, the victims can claim all the funds invested. They will have three years to do this.

But the background is not encouraging. The most high-profile such problems, such as the one with Pescanova or Banco Popular, tend to drag on, and sometimes compensation is left in limbo, “unless the organization offers an agreement, as Bankia did at the time,” says Marisa Protomartir, director of legal issues Association of financial users Asufin. Bankia has launched a compensation scheme for hundreds of thousands of people affected by the abuses of its stock market debut. Many received their money back in exchange for dropping lawsuits.

Perhaps Grifols’ most memorable precedent is that of Spanish Wi-Fi operator Gowex, “because the bear that hastened his downfall was also Gotham City,” says Guillermo Bias, a litigation and arbitration partner at AGM Abogados. Genaro García’s company was listed on the old Mercado Alternativo Bursátil (MAB) exchange between 2010 and 2014, until he admitted to manipulating his accounts. Nine years later, four investors succeeded in getting the Supreme Court to censure consulting firm Ernst & Young (EY) as a responsible auditor. Asufin, for his part, is fighting for compensation for the victims and is leading a lawsuit for 3.3 million, which unites 130 shareholders.

One thing is clear: the fight to get your money back takes time. “These are civil suits that can last anywhere from two to two-and-a-half years,” although that depends on the court and whether the ruling is appealed, says Manuel Romero, founding partner of the law firm RRBS Legal. In turn, criminal proceedings can last forever. “This type of procedure can only last six to eight years in the first instance, and an appeal another two years,” says lawyer Guillermo Bias. The general strategy, lawyers show, is to wait for information about a criminal trial to leak that will help build claims in civil proceedings.

This legal adventure would be more tolerable if Spain implemented a class action system, as other countries such as Portugal have done. Our country has fulfilled its duty in time to adapt its laws to promote the group consumer protection mechanism in accordance with the European Union roadmap. In the last draft the model was chosen dodge, that is, a system of trial with witnesses that benefits all victims who do not directly disassociate themselves. Experts believe such an alternative would provide respite to courts overwhelmed by mass litigation such as preferential litigation.

The Spanish Association of Minority Shareholders of Listed Companies (AEMEC) puts it bluntly: “There is no point in each person claiming what is his.” Sources in the association confirm to this medium that they are exploring the possibility of possible legal action to protect victims of Grifols’ fall, on the advice of the law firm Cremades y Calvo-Sotelo. And they add: “We need a more flexible justice system with adequate mechanisms to try to achieve redress for the harm caused.” Although they admit that Grifols’ case “is not yet clear.”

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