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Market abusers to face jail across EU

02 January 2014

Market abusers across the EU within financial services could face jail time, under new rules by the EC.

As part of an effort to restore confidence in the market and boost investor protection, the rules have been agreed by negotiators from European Parliament and member states and include the enforcement of tough criminal sanctions as well as more clearly outlined definitions of punishable offences. 

The aim of the new rules is to curb market abuse, which includes insider dealing, market manipulation (i.e. Libor rate rigging) and unlawful disclosure of information, states the Committee on Economic and Monetary Affairs (the Committee). 

The current big discrepancies between the definitions of offences and the penalties applied for them in different member states mean that market abuse can easily be carried out across borders and fraudsters can operate where penalties are most lenient.

To iron out the differences between EU countries, MEPs want to oblige all member states to set a maximum penalty of no less than 4 years in jail for the most serious forms of insider dealing or market manipulation and 2 years for improper disclosure of information, throughout the EU. 

The Committee says insider dealing and market manipulation should be punishable as criminal offences when they were intentional; incitation, aiding and abetting will be treated in the same way. Moreover, the attempt to commit a breach could also be punished. Insider dealing offences punishable by four years imprisonment are, for example, those where inside information is intentionally used to buy or sell financial instruments or to cancel or amend an order.

Market manipulation offences punishable with a four-year jail term consist, for example of: entering into a transaction or placing an order which gives false or misleading signals about supply, demand or price of one or several financial instruments or providing false or misleading inputs manipulating the calculation of benchmarks.

Emine Bozkurt (S&D, NL) the leading MEP from the LIBE committee, said that this has ‘sent out a signal that we do not want our citizens to pay for the criminal behaviour of market abusers. Moreover, we have ensured that manipulation of benchmarks is a crime and falls under the definition of market manipulation. To show that it will be no longer possible to get away with an administrative sanction for the most serious financial crimes is important to regain trust in the financial markets. We have made it possible to prosecute cross border crimes more easily; the authorities will get sufficient tools and resources to fight market abuse crimes’.

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