The European Commission has vowed to get tough on insider dealing and market manipulation, proposing EU-wide rules on minimum criminal sanctions.
The globalisation of financial markets in recent years has given rise to new trading platforms and technologies and therefore new ways to manipulate markets, says the EC. Investors involved in market abuse can currently evade sanctions by taking advantage of different laws in the 27 EU member states.
To help combat this, the Commission is using new powers under the Lisbon Treaty to enforce an EU policy through "effective, proportionate and dissuasive" criminal sanctions. Member states will be required to impose these sanctions for inciting, aiding and abetting market abuse, as well as for attempts to commit such offences.
Michel Barnier, internal market and services commissioner, says: "Sanctions for market abuse today are too divergent and lack the necessary deterrent effect. By imposing criminal sanctions for serious market abuse throughout the EU we send a clear message to deter potential offenders - if you commit insider dealing or market manipulation you face jail and a criminal record."
Meanwhile, the EC is also strengthening the existing Market Abuse Directive framework in an attempt to keep up with the fast developing environment.
Most significantly, the rules are being extended to financial instruments only traded on new platforms and over the counter, currently not covered by EU legislation. It will also look to incorporate the use of new technology such as high-frequency trading. A number of measures are also included to help ensure regulators have access to the information they need to detect and sanction market abuse.
"By extending and reinforcing our legislative framework, as well as toughening up the powers and sanctions available to regulators, today's proposals will equip them with the tools to keep markets clean and transparent," says Barnier.
The proposals now pass to the European Parliament and the Council for negotiation and adoption. Both sets of plans would then be rolled out within two years.