FINANCIAL aMARKETS : MARKET ABUSE: EP AND COUNCIL BEEF UP CRIMINAL SANCTIONS.

The most serious forms of market abuse, such as insider dealing, will be punishable by a maximum prison term of four years. This is one of the key aspects of the political compromise sealed by the European Parliament and the Council, on 20 December 2013, on the draft directive that will for the first time ever apply criminal sanctions to financial market offences at European level.

The EP is expected to adopt formally its position on the compromise text at its February plenary session. The Council also has to fomally validate it.

"There are currently considerable differences between how member states sanction market abuse. Harmonised minimum rules will ensure that perpetrators cannot exploit differences in regimes across the EU," explains rapporteur Arlene McCarthy (S&D, UK).

Under the text, the following types of abuse are criminal offences: 1. insider dealing, which is the trading of financial instruments by an individual who has access to price-sensitive inside information about them(1); 2. market manipulation, which occurs when a person artificially manipulates the prices of financial instruments (eg by spreading false information); 3. unlawful disclosure of inside information.

The spelling out of prison terms in the legislative text itself, defended by MEPs, was one of the toughest aspects of the negotiations. The parties agreed that market manipulation and insider dealing would be punishable by a maximum term of at least four years. The...