The New Market Abuse Regulation and Directive on Criminal Sanctions
The Market Abuse Regulation and the Market Abuse Directive proposed by the European Commission were published in the Official Journal on 12 June 2014. The new legislation aims to solve the problems identified with the application of the current Market Abuse Directive and to ensure market integrity and investor protection by setting a common legislative framework for investigative and administrative sanctioning powers of national authorities and criminal sanctions within EU member states. The scope of the new legislation aims to cover a broader range of financial instruments as well as the full range of emission allowances and certain rules and principles, for example on “market soundings” have been formalised.
ESMA is currently preparing relevant guidelines and technical standards to be submitted to the Commission by 3 July 2015. The Market Abuse Regulation enters into application on 3 July 2016 and the Member States have two years to implement the Market Abuse Directive into their national law.
How will this affect the current Finnish legislation?
The current Finnish Criminal Code already covers for the most part the obligations introduced by the Market Abuse Directive, although some amendments, regarding for example the manipulation of interest rates and benchmarks, would be needed. Also the scope of the essential elements of an offence with regards to market places and financial instruments would be extended. There have been discussions around the efficiency of the criminalisation as the burden of proof required is rather high and there are some challenges for the regulators to master the constantly changing market and the complexity of it.
Market Abuse Regulation introduces several changes the most relevant being (i) the notification time for transactions by permanent insiders which will change from seven days to three days; and (ii) administrative measures and sanctions, which will rise significantly. For example the maximum sanction for market manipulation for natural persons will be raised from EUR 100 thousand to EUR 5 million and for legal entities from EUR 10 million to EUR 15 million or from 10 per cent of the total annual turnover to 15 per cent.