Market abuse targeted by EU through wide criminal sanctions

On the forth of February 2014, the European Parliament voted in favor of the final Draft law on market abuse, a Proposal to deeply penalizes market manipulators as criminals through sanctions of a minimum four-year prison term for serious offences .

 

As the Vice President of the European Parliament’s Economic and Monetary Committee and the lead negotiator on the market abuse law, Arlene McCarthy explained, the current Member States sanction systems are often very different from one to another and some of the market actors are not always submitted to these sanctions. This situation leaves these actors free to exploit these gaps in regimes across EU in order to avoid their legal obligations and act in a way that may lead to a new financial crisis. However, the new Directive, complying with the Lisbon Treaty, sets up a common EU minimum criminal law standards solving these issues. In fact, all legal persons are now targeted by the new rules, including financial institutions or investments firms, and shall be criminally liable for market abuse offences. Moreover, even involuntary behaviors could be sanctioned as Member states are given the option to define reckless or negligent market manipulation as a criminal offence. Inciting, aiding and abetting acts of market abuse shall also be considered as a criminal offence. The scope of the market abuse legislation shall also be broadened by being expanded over new trading platforms and the counter trading. Lastly, the Directive precisely defines what ‘serious cases’ are, in order to condemn them unequivocally.

 

The second strength of this Directive is that its final draft proposes what could be defined as a minimum level of sanctions for criminal market abuse. Michel Barnier, the internal markets Commissioner precisely sums up the guiding principles of the legislation by stating that “the EU’s new market abuse framework will ensure that those who commit market abuse will face huge fines or jail across Europe”. But this could only be the basis for a deeper and stricter sanctions regime. Actually, since the Proposal should lead to the creation of a minimum harmonization directive, Member States should be able to adopt and apply more rigorous rules to counter offenders. Indeed, they shall have the possibility to increase the repression over the offenders, as the Proposal give them different optional decisions to take such as the publication of sanctions which is a powerful deterrent or the sanction of reckless or negligent manipulation of the market as criminal offences. One may criticize this optional approach as it could enhance the difference between Member States regimes but this should not be the case as the Directive shall constitute a minimum sanction regime that insures that all serious crimes are properly sanctioned across EU. In this way, even if perpetrators could still exploit some differences, they shall not be too important and should more probably be considered as a flexible way to enhance the tackling of market abuse through EU.

 

Hadrien Chautard

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