(2004/C 78 E/0162)

WRITTEN QUESTION E-2732/03

by Herbert Bösch (PSE) to the Commission

(11 September 2003)

Subject:   Possible conflict of interests at the Directorate-General for Competition

The Directorate-General for Competition is entrusted with a variety of sensitive tasks such as deciding whether to approve company mergers, to approve them conditionally, or to reject them. As part of their duties, Competition DG officials deal with a range of insider information, which, when made public, has a considerable effect on the share prices of the companies concerned on Europe's stock exchanges.

Is there a compliance code at the Competition DG and at the Commission's departments privy to sensitive information, as is the case at investment banks, in order to prevent insider information from being misused? Is there an official within the Commission responsible for compliance?

Do officials who work with such information have to declare their share-trading activities? Is there a watch list or a block list covering shares in companies about which sensitive information is known? Do Commission officials working with sensitive information have to declare the details of their bank accounts used to carry out securities transactions?

How many in-house reviews has the Commission already conducted to ensure that insider information is not misused?

Have any of these reviews uncovered cases of suspected misuse of sensitive information?

Answer given by Mr Monti on behalf of the Commission

(14 November 2003)

In 1999, Directorate General (DG) Competition developed a compliance code based on the Staff Regulations for its officials, temporary and auxiliary staff, trainees and seconded national experts to manage the risks concerning conflicts of interest and insider dealing. This code complements, and draws staff's attention to, the Belgian criminal law prohibiting insider dealing.

The aim of the compliance code is on the one hand to prevent and resolve conflicts of interest and on the other hand to prevent dealing on stock markets on the basis of non-public information which comes to the knowledge of DG Competition staff.

As far as conflicts of interest are concerned, the code states that ‘the official must not own shares, or derivatives (options, warrants, etc.) linked to shares, in the company concerned’. Should a potential or apparent conflict of interest (e.g. if the case handler or a member of his or her close family owns shares in one of the companies involved in a case) arise in a particular case, the official is required to report this to his superior as soon as it becomes known. Appropriate measures can then be taken by the hierarchy, including if necessary a reallocation of the case to another official.

In terms of insider dealing the code states that ‘officials should never themselves deal, or instruct or advise others to deal, in securities on the stock markets on the basis of'sufficiently precise non-public information'(expression used in the Belgian Act) which is'liable significantly to influence the price'(expression used in the Belgian Act)’.

These rules have been implemented since 1999. Whilst there is no specific ‘surveillance list’ or ‘black list’, all staff have to sign a written declaration that they accept and are willing to apply these specific rules on conflict of interest and insider dealing as well as the more general security instructions for ‘handling classified information in DG Comp’. DG Competition requests officials in other DGs who are involved in merger cases through interservice consultations to sign the same declarations.

According to the internal control standards the Commission has adopted (specifically control standard number 1 concerning ‘ethics and integrity’), DG Competition has made available several documents to staff (including the Staff Regulations, Code of good administrative behaviour, Guide to testing for vulnerability to fraud). These documents, including the ethical code for staff of DG Competition established in 1999 referred to above, are available on the intracom website of DG Competition and hence easily accessible to all staff of DG Competition.

In addition, DG Competition has developed specific rules and guidelines on assignments and outside activities of officials and former officials, including when officials apply for ‘Leave on Personal Ground’.

The application of these rules is supervised by the management of the directorates and by the security officer in DG Competition's ‘Resources’ Directorate. Moreover, a Deputy Director General has specific responsibility for matters of security and ethics.

These issues are discussed regularly in management meetings and repeated in communication to staff to increase staff awareness, ongoing attention and sensitivity. The management of DG Competition has not discovered any cases of suspected insider dealing, nor has it ever been alerted of any such suspicions by any stock market authority.