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EU introduces criminal sanctions for market abuse

04 Feb 2014 18:09:48 | edem

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The EU Parliament on Tuesday backed the final draft of legislation that will introduce Europe-wide minimum criminal sanctions for market manipulation and insider dealing.

Once the directive is implemented, someone found guilty of insider dealing or market manipulation will face a minimum four-year prison sentence. The unlawful disclosure of inside information will carry a minimum two-year sentence. Countries will have room to add even more stringent penalties.

The legislation has arisen from a review of the market abuse directive and extends it to commodity and related derivatives markets, as well as technology-related developments such as high-frequency trading. All financial instruments traded on platforms and over the counter will come under its scope.

The new directive means a common definition will exist across the EU for insider dealing, unlawful disclosure of information and market manipulation. Up until now, EU member states have had different definitions and sanctions for market abuse.

Under the new rules, banks and financial institutions will be criminally liable for market abuse. The directive complements the separate market abuse regulation, which the EU parliament voted in favour of last September.

The vote on the text for the directive on criminal sanctions for market abuse follows a political agreement reached in December, when the legislation went through trilogue negotiations – the final legislative step for agreeing EU law.

The directive is expected to be published in the EU’s official journal in June. Once it is published, countries will have two years to transpose the directive into national law. Fionn O’Raghallaigh

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