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Plans progress for market abuse criminal sanctions

A leading committee of the European Parliament, the Economic & Monetary Affairs Committee, has given its support to a European Commission proposal for criminal sanctions to tackle the abuse and manipulation of financial markets.

The Commission’s proposals come in the form of a draft Directive, containing new rules for countering insider dealing and market abuse. If approved, the draft Directive will require Member States to make sure that such behaviour, including the manipulation of benchmarks, is a criminal offence, punishable with effective sanctions everywhere in Europe.

Investors who trade on insider information and manipulate markets by spreading false or misleading information can currently avoid sanctions by taking advantage of differences in law between the 28 EU Member States. Some countries’ authorities lack effective sanctioning powers while in others criminal sanctions are not available for certain insider dealing and market manipulation offences.

The Commission hopes that the introduction of effective sanctions will have a strong deterrent effect and reinforce the integrity of the EU’s financial markets. It has been discussing the proposals in trilogue with the Council of Ministers and the European Parliament, and reached agreement with them in late December.

It is this agreement that has now been approved by the Committee. Once finalised, it will mean that:

  • There will be common EU definitions of market abuse offences such as insider dealing, unlawful disclosure of information and market manipulation;
  • There will be a common set of criminal sanctions including fines and imprisonment with a maximum sanction of at least four years for insider dealing/market manipulation and of two years for unlawful disclosure of inside information;
  • Legal persons (companies) will be held liable for market abuses;
  • Member States need to establish jurisdiction for these offences if they occur in their country or the offender is a national;
  • Member States need to ensure that judicial and law enforcement authorities dealing with these highly complex cases are well trained.

The draft Directive complements a separate proposal for a Regulation on Market Abuse, endorsed by the European Parliament on 10th September 2013, which aims to improve the existing EU legislative framework and reinforce administrative sanctions.

The trilogue agreement is expected to be confirmed by the full European Parliament in February 2014. Domestic legislative change is not expected since the Government believes that the UK is already compliant. Whether this assessment is correct is a matter which is open to debate.

Contact Jonathan Fisher QC

For specialist advice on issues of corporate, regulatory or financial crime, contact Jonathan Fisher QC on +44 (0)20 7427 463 or click here to make an electronic enquiry.

 

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The views expressed in this article represent those of the author and not Bright Line Law.

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