Market abuse and insider dealing targeted by harsh EU legislation

The European Parliament yesterday voted in favour of new EU proposals to penalise market manipulators, including the imposition of a minimum four-year prison term for serious offences such as the unlawful disclosure of information and insider trading.

MEPs voted by 618 votes to 20 votes in favour of the directive, with 43 abstentions.

The new legislation on market abuse, backed yesterday by MEPs, was initiated by the European Commission in 2011 in the wake of the financial crisis. The rules will replace the 2003 market abuse directive, with the scope expanded to include new trading platforms and over the counter trading.

It also explicitly bans the manipulation of benchmarks, such as Euribor and Libor.

While many countries already have strong sanctioning powers when it comes to market abuse, other EU member states’ criminal sanctions are limited or ineffective. The new directive provides common EU minimum criminal law standards, a procedure permissible under the Lisbon Treaty.

Once it is officially adopted in June, member states will have two years to transpose the directive into national law.

Speaking in Strasbourg, internal markets commissioner Michel Barnier said the vote sent a clear signal there would be "zero tolerance for manipulators" in financial markets.

“The EU’s new market abuse framework will ensure that those who commit market abuse will face huge fines or jail across Europe.”

Loopholes closed
Justice commissioner Vivian Reding said the directive was an important cross-border initiative, which would close the loopholes open to exploitation by criminals.

MEPs also debated the plan for a Single Resolution Mechanism, an authority tasked with winding down troubled banks – which was agreed by member states in December but now must be backed by the European Parliament. A key meeting – or “trilogue” – between the parliament’s representatives and negotiators on behalf of member states is scheduled for this evening in Strasbourg. It is understood that significant distance remains between the parliament and the council’s position, particularly over the proposed 10-year time-frame during which the €55 billion resolution fund will be built up and gradually “mutualised” into a common, European fund .