The leading committee of the European Parliament for Economic matters has today given its support to a European Commission proposal for criminal sanctions to tackle the abuse and manipulation of financial markets (IP/11/1218).
The Parliament’s Economic & Monetary Affairs Committee (ECON) unanimously backed an agreement on the proposal reached with Member States, represented in the Council of Ministers, late last year (IP/13/1299). Under the new rules for countering insider dealing and market abuse, Member States will have to make sure that such behaviour, including the manipulation of benchmarks, is a criminal offence, punishable with effective sanctions everywhere in Europe. The agreement is now expected to be confirmed by the European Parliament in plenary in February 2014.
"We welcome today’s vote in favour of the Commission’s proposal, which confirms that Europe is willing to take all measures necessary to counter insider dealing and market abuse in its financial markets," said Vice-President Viviane Reding, the EU's Justice Commissioner and Michel Barnier, Internal Market and Services Commissioner. "We would like to thank the ECON Committee and its rapporteur, Arlene McCarthy, for their support and we now look forward to a swift adoption of this important proposal by Parliament and Council. We need to safeguard the integrity of our markets and protect the money of our citizens."
The agreement voted on today means 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.
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. Effective sanctions can have a strong deterrent effect and reinforce the integrity of the EU’s financial markets.
That is why the European Commission on 20 September 2011 proposed EU-wide rules to ensure minimum criminal sanctions for insider dealing and market manipulation (IP/11/1218). In July 2012 the Commission presented amendments to its original proposal in order to clearly prohibit the manipulation of benchmarks, including LIBOR and EURIBOR, and make such manipulation a criminal offence (IP/12/846).
Proposing these rules, the European Commission for the first time used new powers under the Lisbon Treaty to enforce an EU policy through criminal sanctions. The draft Directive requires Member States to take the necessary measures to ensure that the criminal offences of insider dealing and market manipulation are subject to criminal sanctions. Member States will also be required to impose criminal sanctions for inciting, aiding and abetting market abuse, as well as for attempts to commit such offences. The Directive complements a separate proposal for a Regulation on Market Abuse, endorsed by the European Parliament on 10 September 2013 (MEMO/13/774), which improves the existing EU legislative framework and reinforces administrative sanctions.