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Brussels, 3rd December 2002

Securities markets: Commission welcomes Council's adoption of Market Abuse Directive

The European Commission has welcomed the Council's definitive adoption on 3 December of the Directive on insider dealing and market manipulation (market abuse). This adoption is a major step towards integrated financial markets that investors and the public can trust. The Directive will also boost market integrity in the field of financial instruments. The Council was able to agree on the text adopted on 24 October at second reading by the European Parliament (IP02/1547). The Commission put forward its original proposal in May 2001 (IP/01/758). This is the first adoption of a framework Directive, based on the new procedures agreed by the Council and the European Parliament following the recommendations of the Lamfalussy group. The Directive is due to be implemented by Member States within 18 months of its publication in the EU's Official Journal.

Internal Market Commissioner Frits Bolkestein said "With the rapid adoption of the Market Abuse Directive, the European Parliament, the Member States and the Commission in unison have put down a clear marker. We will not tolerate fraud or market manipulation in any way, shape or form on European capital markets. We will build the investor and public confidence that is necessary for sustained economic growth and wealth creation. This shows again that where the political commitment is there we can make fast and effective progress towards grasping the enormous economic benefits that recent research shows financial integration will bring."

The Directive:

  • reinforces market integrity

  • contributes to the harmonisation of the rules for market abuse throughout Europe

  • establishes a strong commitment to transparency and equal treatment of market participants

  • requires closer co-operation and a higher degree of exchange of information between national authorities, thus ensuring the same framework for enforcement throughout the EU and reducing potential inconsistencies, confusion and loopholes.

The Directive covers both insider dealing and market manipulation. The same framework applies to both categories of market abuse. This will simplify administration and reduce the number of different rules and standards across the European Union.

The Directive covers all financial instruments admitted to trading on at least one regulated market in the European Union, including primary markets.

The Directive applies to all transactions concerning those instruments, whether those transactions are undertaken on regulated markets or elsewhere. This is to avoid unregulated markets, Alternative Trading Systems and others being used for abusive purposes concerning those financial instruments.

The Directive requires each Member State to designate a single administrative regulatory and supervisory authority with a common minimum set of responsibilities to tackle insider trading and market manipulation.

The Directive guarantees the freedom of expression and the freedom of the press. Only journalists who deliberately or negligently pass on false information and then profit financially or otherwise from having done so will be covered by the Directive.

The Directive also establishes transparency standards requiring that people who recommend investment strategies to the public or to distribution channels disclose their own relevant interests. In practice, this provision will in particular apply to financial analysts, and to one specific sub-category of financial journalists - those recommending investments to the public.

Framework Directive

The Market Abuse Directive is a framework Directive as foreseen under the European Council's March 2001 Stockholm Resolution on securities legislation (on the basis of a report from a group of Wise Men chaired by Alexandre Lamfalussy). The framework was agreed with the European Parliament in February 2002 (see IP/02/195). The Directive lays down the essential principles. The technical details will be treated apart, through 'implementing measures' to be taken by the Commission under the scrutiny of European Securities Committee (ESC, composed of representatives of Member States) and of the European Parliament. In particular, for the first time, the ESC will act as a regulatory committee when examining Commission's draft implementing measures next year.

For drafting the implementing measures, the Commission will consider the technical advice delivered by the Committee of European Securities Regulators (CESR), which is due at the end of 2002.

The benefits from this process will be a faster adoption of Directives - limited to essential principles - and higher flexibility in updating the technical details related to these principles.

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