Financial market manipulators may face at least four years in jail

The European Parliament has approved draft rules which would require judges to sentence offenders guilty of serious financial offences to at least four years in jail.

The draft rules lay down tougher criminal penalties, including prison terms, for serious market abuses such as unlawful disclosure of information, insider dealing or market manipulation and also inciting, aiding or abetting them.

Under the new rules, the definitions of offences and the penalties applied for them would be harmonised.

Market manipulation offences punishable by a four-year jail term would include entering into a transaction or placing an order which gives false or misleading signals about the supply, demand or price of one or more financial instruments. They would also include providing false or misleading inputs to manipulate the calculation of benchmarks, such as the London Interbank Offered Rate (LIBOR) or Euro Interbank Offered Rate (EURIBOR).

Insider dealing offences punishable by four years’ imprisonment include those in which inside information is used with intent to buy or sell financial instruments or to cancel or amend an order.

To ensure that the new tougher penalties apply EU-wide, all member states would have to require their judges to sentence maximum penalty offenders to no less than four years in jail for the most serious forms of insider dealing or market manipulation and no less than two years for unlawful disclosure of information.

Once the draft rules are formally approved by the Council of Ministers, member states will have 24 months to put them into effect.

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