EP adopted Directive on Market Abuse (1st reading)

14 March 2002



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Robert Goebbels presented the reactions of the Economic Committee to the Commission's proposal relating to Market Abuse. The need for such legislation could be seen by the fact that there were only 13 successful prosecutions leading to criminal penalties between 1995 and 2000 in 17 European countries.

Goebbels underlined the need for a precise yet flexible definition of market manipulation. On account of differences in legal systems across the EU, he emphasised that he preferred an approach based on administrative sanctions, with the Commission putting forward a list of guidelines. His other concern was to see an arbitration body to settle any crossborder disputes. This could liase closely with national regulatory authorities. He too looked forward to the legislation securing widespread approval.

Amended was the precise definition of inside information that does not include publicly availalbe research material. The definition of 'insider trading' now covers trading after hours which could mislead investors and the dissemination of false information which could also mislead investors.

Parliament has also amended the annex to the Directive, inserting a non-exhaustive list of examples of methods being used for market manipulation. Professional economic actors must contribute to market integrity by various means. These could include the creation of 'grey lists', the application of 'window trading' to sensitive categories of personnel, the application of internal codes of conduct and the establishment of Chinese walls. Preventive measures must be enforced with determination and dutifully controlled, which implies the designation of compliance officers and periodic checks conducted by independent auditors.

Furthermore, Member States are to ensure that market operators adopt structural provisions making market manipulation more difficult. Such provisions include maintaining a minimum level of liquidity for each financial instrument, transparency of transactions concluded, total disclose of price-regularisation agreements, and a fair system of order pairing.

Parliament is concerned that a variety of competent authorities in Member States creates confusion among economic actors. A single competent authority should be designated in each Member State to supervise compliance with the directive. A European body is to be responsible for settling cross-border disputes. Parliament seeks to clarify the legal situation on sanctions and the Commission is asked to draw up an indicative list of measures and sanctions as a guidance for national authorities.

Commissioner Bolkestein recognised the committee's support for the Commission's move to enhance protection for savings. And, indeed, he was prepared to accept the amendments proposed by Mr Goebbels. He could not, however, go along with several other amendments, including two from Mr Lehne, expressing doubt over the phrasing relating to comitology or implementing procedures, which he felt was not necessarily completely in line with the agreement between Commission and the Parliament, not to mention the position taken by Council.

Due to latest changes and agreements on the original agreed report in Committee the finally adopted text is only available on the plenary session document pages 27-60.

(see original Goebbels report)

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