Criminal sanctions for market abuse

This European Union legislation aims at improving the integrity of European financial markets.

ACT

Directive 2014/57/EU of the European Parliament and of the Council of 16 April 2014 on criminal sanctions for market abuse (market abuse directive).

SUMMARY

Abuses that take place on financial markets, for instance when market participants spread false information on the prices of financial products, may be very detrimental to consumers, investors and the economy as a whole.

This act lays down criminal sanctions for the most serious, intentionally committed market abuses. The new rules should be applicable no later than July 2016 in all EU countries.

KEY POINTS

1.	Sanctions for people (natural persons) - prison sentences

Under the new rules, insider dealing and market manipulation, two major forms of market abuse, are punishable by a maximum term of imprisonment of at least 4 years.

Market manipulation consists in manipulating the prices of financial products artificially. For instance, this can happen when an individual spreads false information on the supply, the demand or the price of a financial product.

Insider dealing is when an individual trades a financial product with access to ‘inside information’. This is confidential information relating to the financial product traded or the company that issued it on the market. Accessing this type of information gives him an unfair advantage.

Unlawful disclosure of ‘inside information’ is also considered as an offence punishable by a maximum term of imprisonment of at least 2 years. This happens when an individual discloses ‘inside information’ to other persons, unless this disclosure is made in the regular exercise of its profession.

2.	Sanctions for companies held liable (legal persons)

The rules provide that companies held liable for market-abuse offences are subject to criminal or non-criminal fines. Other sanctions may also be applied, such as a temporary or permanent disqualification from the practising of commercial activities.

Regulation (EU) No 596/2014, adopted alongside these new rules, strengthens administrative sanctions that can also be imposed for market abuses. It also strengthens national regulators’ investigative powers to detect abuses on financial markets.

RELATED ACTS

Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (Official Journal L 173 of 12 June 2014).

last update 04.08.2014