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The regulator is investigating whether EADS executives and its main corporate shareholders - Lagardere Groupe and Daimler AG - sold shares because they knew that Airbus' program to build the world's largest jetliner, the A380, was running into delays.
The French-German conglomerate said on Tuesday that it would defend itself against the allegations, but it also acknowledged that the case could significantly tarnish its reputation.
The market watchdog, the Autorite des Marches Financiers or AMF, said letters outlining market abuse proceedings will be sent to the people concerned in "coming days" after its board on Monday discussed the findings of a lengthy probe into alleged wrongdoing at EADS.
Unknown number
AMF and French judicial authorities have been investigating EADS share sales going back to May 2005. Many top executives and the top shareholders sold shares before a June 2006 announcement of delays to the A380 program. The setback sent the EADS stock price crashing 26% in one day.
The AMF said it will "immediately" inform the Paris prosecutors' office of its findings.
The regulator would not say how many individuals the probe named.
French financial daily Les Echos reported that as many as 17 people are concerned, without saying where it got the information. The newspaper said that the AMF board adopted "almost totally the conclusions of the authority's investigator, who last September confirmed the existence of 'massive' insider trading".
AMF spokesperson Christine Anglade declined to comment.
Reputation damage
EADS, in a statement, recognised that the proceedings "may have significant consequences on its image and reputation," but said it did not foresee financial risks for the group.
CEO Louis Gallois said the company will help its managers defend themselves.
The company "intends to demonstrate that it has applied standards of excellence when communicating to the market, and has acted with full transparency," he said in the statement.
Lagardere Groupe, one of EADS' largest shareholders, also "took note" of the AMF's decision, according to a statement Tuesday. Daimler spokesman Thomas Froehlich said the company is "firmly convinced" it did not participate in insider trading.
Sensitive times
The AMF's conclusions come at a sensitive time for EADS. Last week, it scored its second big government order in as many months, when Britain signed a £13bn contract to replace the Royal Air Force's aging fleet of mid-air refuelling tankers.
EADS was the junior partner in a consortium headed by US defence company Northrop Grumman Corporation that beat out US rival Boeing to a $35bn contract to provide 179 refuelling aircraft for the US Air Force.
EADS shares opened down, then rose 1.5% to $24.10 in mid-morning trade on Tuesday.
- AP
