Today the European Parliament Economic and Monetary (ECON) Committee voted on the European Commission’s proposal for criminal sanctions to tackle the abuse and manipulation of financial markets.
From now on Member States will no longer be allowed to turn a blind eye to such behavior, especially the manipulation of benchmarks, and should treat it as a criminal offence. To this end, effective sanctions will have to be put in place in Europe.
The agreement is now expected to be confirmed by the European Parliament in plenary in February 2014.
The proposal sets out common definitions of market abuse offences such as insider dealing, unlawful disclosure of information and market manipulation. A common set of criminal sanctions including fines and imprisonment with a maximum sanction of at least four years for insider dealing as well as for market manipulation and of two years for unlawful disclosure of internal information, will have to be established under the proposal’s rules.
Vice-President Viviane Reding, the EU's Justice Commissioner and Michel Barnier, the Internal Market and Services Commissioner, have welcomed the vote in favour of the Commission’s proposal, stressing it “confirms that Europe is willing to take all measures necessary to counter insider dealing and market abuse in its financial markets".
For EU savers and investors it is a positive but rather tiny step in the right direction. Indeed, the EU Proposal aims at having all Member States sanction market abuses with a maximum penalty of four years of jail. It is a bit stronger than the existing maximum two year penalty in France, but it is still far away from the US sanction level of up to 20 years of jail per occurrence.
It also remains to be seen how the Member States will actually enforce it. The experience of the last decades in France for example is not reassuring: only two jail sanctions have ever been issued by the French courts for market abuses.
Please read also the ECON Committee press release on the proposal to criminalize market abuse and BETTER FINANCE’s “Market abusers: welcome to France?” post.