sou · H2B346 · 2014-06-27 00:00:00 — Under the Inquirys proposal, other criteria, such as monetary limits or category of person, will not be used in setting this definition. The Inquiry considers that intentional acts that constitute ordinary offences or gross offences, as well as instigation of and complicity in such offences, should remain punishable. The same is to apply to attempted insider offences and attempts and preparation to commit gross insider offences. A new provision that criminalises attempted market manipulation will be introduced into the Market Abuse Penalties Act. Consequently, the Inquiry proposes that criminal liability for and minor offences under the Market Abuse Penalties Act be abolished. Such acts can instead be subject to examination and sanctions under the administrative procedure. The Inquiry proposes that one and the same prohibited act may not be subject to both a criminal penalty and an administrative sanction. For reasons pertaining to legal certainty, and in particular so as not to violate the principle of ne bis in idem, it is proposed that the new regulatory framework of administrative sanctions under the Market Abuse Regulation that will be placed alongside the penalty provisions of the Market Abuse Penalties Act should be based on a model in which public bodies choose whether to deal with prohibited acts in either the administrative or the criminal sanctions system. The decision by the authorities to choose between systems should be made prior to a decision on initiating prosecution or a decision on imposing administrative sanctions has been made. A choice system presupposes more developed cooperation between the authorities, partly to ensure that an individual is not subjected to duplication of legal procedures regarding one and the same act, and partly to create opportunities for the authorities to choose between – the administrative and the criminal sanctions system. Regulations on the obligation to provide information and the obligation to cooperate will be introduced in both the new Act and the Market Abuse Penalties Act. Accordingly, the proposed definition of the criminalised area for market abuse means that only intentional ordinary offences or gross offences are punishable. Despite the fact that these offences can normally be considered as serious cases of market abuse and should lead to criminal sanctions under the Market Abuse Direc- tive, they may include certain acts which can be considered as less deserving of punishment, and which, in addition, could suitably be dealt with in the administrative sanctions system. The Inquiry therefore proposes that a rule on an examination of the right to prosecute be introduced in the Market Abuse Penalties Act. The rule would be applicable to cases of market manipulation consisting of isolated transactions that do not result in any change of the actual ownership of a financial instrument, and to cases of unauthorised disclosure of inside information in which someone, without it being warranted, has received inside information and been included on an insider list such as is referred to in Article 18 of the Market Abuse Regulation. In these cases, prosecution shall only be initiated if called for from a public interest perspective. For the purpose of effectiveness, it is further proposed that a jurisdiction be introduced stipulating that under the Market Abuse Penalties Act, prosecution proceedings are to be initiated at District Court and appeals accordingly are to be lodged with the of Appeal. Division of investigative responsibility and expansion of investigative powers for As the competent authority, is to supervise compliance with the provisions of the Market Abuse Regulation and investigate suspected infringements of the Regulation. How- ever, will remain obliged to report to the Swedish Economic Crime Authority when there is reason to assume that a market abuse offence has been committed. Under the Inquirys proposal, the Swedish Economic Crime Authority will retain responsibility for conducting preliminary investigations and initiating prosecution for offences under the Market Abuse Penalties Act. Accordingly, will conduct independent investigations concerning suspected infringements of the Market Abuse Regulation. In line with this, should also review the reports on suspected market abuse that market actors are obliged to submit to and have the power to supplement the reports with certain examinations of its own. However, the design of the current provision on the obligation to report in the Market Abuse Penalties Act, and statements in the preparatory materials, have resulted in role in this regard most nearly resembling a letterbox function. For this and other reasons, the Inquiry proposes that the provision be removed from the Act. Under the Inquirys proposal, when the Swedish Economic Crime Authority has decided to initiate a preliminary investigation, may not pursue any investigative measures on its own. It is, however, proposed that it be possible for Finans- inspektionen to be engaged for assistance in the preliminary investigation. If the Swedish Economic Crime Authority decides not to initiate a preliminary investigation, or to discontinue a preliminary investigation, the Authority is to inform Finans- inspektionen, which may thereafter continue the investigation under the provisions of the administrative sanctions system. If, in such a case, circumstances arise that lead to consider that there is, after all, reason to assume that an offence has been committed, the Inquiry proposes that should again report this to the Swedish Economic Crime Authority. An initial assessment, for example that there was no intent, could prove to be incorrect. In that case, the Swedish Economic Crime Authority must again decide whether a preliminary investigation should be initiated. However, under the proposal concerning the final juncture by which a choice must be made, a report cannot be submitted to the Swedish Economic Crime Authority after a decision to impose administrative sanctions has been taken. (See the proposal concerning decision-making procedures for admini- strative sanctions in the next section.) As mentioned above, the proposed system of choice and the division of investigative responsibility presupposes that the authorities cooperate with one another. This in turn also requires that the authorities are able to share information with one another. To facilitate an exchange of information, the Inquiry proposes that the provisions on secrecy in Chapter 35, Section 1 of the Public Access to Information and Secrecy Act (2009:400) should apply to both the Swedish Economic Crime Authoritys preliminary investigations and investigations into suspected infringe- ments of the Market Abuse Regulation. A new section will be introduced into the Act containing a secrecy-override rule that enables the authorities to exchange information. To a great extent, the supervisory and investigative powers that the Market Abuse Regulation prescribes for the competent authorities correspond to the powers also prescribed in the 2003 Market Abuse Directive. Under the Regulation, an authority is to have the right to access information from anyone, conduct on-site investiga- tions, freeze assets and prohibit certain activities. One assumption when implementing the 2003 Market Abuse Directive into Swedish law was that infringements of the prohibitions against market abuse were to be handled within the criminal law area, and accordingly the Swedish Economic Crime Authority was to lead investigations and a general court take decisions on penalties. This had repercussions on how the investigative powers under the 2003 Market Abuse Directive were implemented into Swedish law. In light of the Inquirys considerations concerning an admini- strative sanctions system, there is no longer scope for the current division of investigative powers between and the Swedish Economic Crime Authority. The Inquiry therefore proposes expanding current powers so that they correspond with the requirements of the Regulation. visions concerning investigative and super- visory powers will be introduced into the new Act. It should be pointed out here that under Article 23(1) of the Market Abuse Regulation, these powers can be exercised directly by the compe- tent authority, in collaboration with or by delegation to other authorities and actors, or by the competent authoritys application to judicial authorities. Regarding on-site investigations for the purpose of securing evidence (Article 23(2)(e) of the Regulation) concerning suspected infringements of the prohibitions against insider dealing and market manipulation, it is proposed that such an investigation may be conducted following a decision by District Court. The information exchange and collaboration with foreign authorities and prescribed by the Market Abuse Regulation can be achieved within the framework of current Swedish law, so no legislative measures are needed. A closer look at the administrative sanctions system To ensure that Member States have a common approach when dealing with infringements of the Market Abuse Regulations rules, the Regulation contains provisions on administrative sanctions and other measures that can be applied in the event of at least certain listed infringements. Accordingly, action is to be taken, but the Regulation does not limit the opportunities of Member States to establish rules on other, or stricter, sanctions and measures than those specifically stated in the Regulation. are provisions on sanctions required if the national legislation of a already contains, or is set to introduce, criminal law regulations on infringements of the Market Abuse Regulations prohibitions or orders. The Inquiry considers that there is no reason to use this criminal law option, and therefore proposes that provisions on administrative sanctions be introduced in the new Act in accordance with what is prescribed in the Regulation. However, no additional or stricter sanctions than those ensuing from the Regulation are proposed. In addition to the infringements that, under the Regulation, could be the object of action, the Inquiry proposes that the previously criminalised disclosure prohibition in Section 11 of the Market Abuse Penalties Act be replaced by an essentially equivalent prohibition in the new Act. As before, the aim of the disclosure prohibition is to ensure that the person who is reported is not warned and able to cover their tracks. A prohibition of this kind is still warranted, and it should be possible to take punitive action by means of administrative sanctions. The Inquiry considers that the Market Abuse Regulation largely presupposes that both natural and legal persons can be the subject of administrative measures and sanctions in the event of infringements of the Regulations prohibitions and disregard of its obligations. Unless specially stipulated, the provisions on sanctions should therefore apply to both natural and legal persons. In addition, the Inquiry proposes that a provision be introduced in the Act that makes it possible to refrain from taking action, for example if the infringement is excusable. Equivalent provisions are also found in other regulations that contain administrative sanctions. Under the Inquirys proposal, the Act should also contain an illustrative list of factors that are to form the basis for choosing administrative sanctions and for determining the size of the finan- cial penalty, for which the starting point should be the gravity and duration of the infringement. The Act should also include pro- visions on maximum levels and adjustment of financial penalties, as well as on payment, collection and time limits. The Inquiry proposes that take decisions on administrative measures and sanctions in the event of disregard of the Market Abuse Regulations prescribed obligations concerning market supervision and reporting, disclosure of inside information, insider lists, reporting of transactions conducted by persons dis- charging managerial responsibilities and persons closely associated with them and the public disclosure of such transactions, and investment recommendations and statistics. However, both reasons of legal certainty and prevailing legal traditions strongly suggest that sanction matters regarding infringe- ments of the Market Abuse Regulations prohibitions against market abuse should be heard by a court of law. This particularly applies in matters concerning natural persons. The Inquiry considers that infringement matters under the Market Abuse Regulation probably fall within the scope of Article 6 of Convention on Where relevant, the rights in this Article also apply to legal persons. Therefore, to avoid differences in the guarantees concerning legal certainty, the procedure should be the same regard- less of whether the matter concerns a natural or a legal person. It may be said that an order whereby must initiate legal action in a court for an examination of imposition of administrative sanctions will delay a decision of this kind. So as not to unnecessarily delay these infringement matters, the Inquiry proposes a model in which first issues a sanc- tions order which – if it is approved – is to be equated with a final and non-appealable judgment. In this way, a court examination is only necessary in cases where an order of this kind is not approved. Accordingly, it is proposed that , by means of an obligatory procedure for sanctions orders, examines issues concerning administrative sanctions for infringements of prohibitions against market abuse. In addition, the Inquiry considers it most suitable that a general court hears sanctions matters involving infringements of prohibitions against market abuse (when a sanctions order that has been issued is not approved). Initially, at least, it can be assumed that the number of such examinations will be limited. Similarly to what has been stated concerning prosecution for market abuse offences, the Inquiry considers that there are, accordingly, substantial grounds for also coordinating court hearings as regards infringements of the prohibitions in the Market Abuse Regulation. It is proposed that the hearing be held at District Court. Channelling both prosecution for market abuse offences and infringements of the Regulations prohibitions against market abuse to one and the same court further increases the potential for more effective processing and consistent practice. If a sanctions order has not been approved within the set time, may, accordingly, initiate legal action at District Court. Regarding an action of this kind, the applicable provisions are those of the Swedish Code of Judicial Procedure on prosecution for an offence for which there is no reason to impose a penalty other than a fine. The new Act will also include provisions on appeals of judgments and decisions. The Inquiry considers that the obligation prescribed in the Market Abuse Regulation to publish sanctions decisions and decisions taken as a result of an infringement of a prohibition or the dis- regard of an obligation under the Regulation should be implemented by means of regulations at ordinance level. Adjustments of Swedish law resulting from the EU legislative acts Proposals arising from the provisions of the Market Abuse Directive Under the Inquirys proposals, insider offences, unauthorised dis- closure of inside information and market manipulation (formerly designated undue market influence) shall, accordingly, remain criminal offences. However, the Market Abuse Directive presupposes certain necessary changes to certain criteria of an offence and adjustments regarding the Market Abuse Penalties Acts scope and definitions. There is no provision in the Market Abuse Penalties Act that specifies the Acts scope. To achieve implementation that is closer in line with the Directive, the Inquiry proposes that a special sec- tion be added to the Market Abuse Penalties Act that, as is the case with the Market Abuse Directive, establishes the scope and the financial instruments that are covered. Furthermore, it is proposed that the restriction that it is to be a matter of trading in the securities market be abolished. The new section will make clear that the Act will also apply to emission allowances and other products under Commission Regulation (EU) No 1031/2010 of on the timing, administration and other aspects of auctioning of greenhouse gas emission allowances pursuant to Directive 2003/87/EC of Parliament and of the Council establishing a scheme for greenhouse gas emission allowances trading within the Community. As a consequential amendment, the provisions on market abuse regarding emission allowances in the form of 2-day spot commodity contracts will be removed from Chapter 8 of the Act (2004:1199). Furthermore it is proposed that a modified and expanded derogation be included in the Market Abuse Penalties Act for actions in buy-back pro- grammes and for stabilising financial instruments. The current definition of inside information will be replaced by a direct reference to the Market Abuse Regulations definition. Regarding insider offences, the requirement concerning trans- formation will be abolished; in this way, the offence covers a per- son who has inside information and no longer just a person who receives inside information. Accordingly, a prosecutor will not have to show how a defendant gained access to the information, merely that he or she did have access to it. Through the proposal, we also achieve a regulation that is in conformity with the Directive. The Swedish prohibition against insider dealing does not make use a criterion. However, a number of procedures are listed that are exempted from the criminalised area. The Inquiry considers that insider offences should not include a criterion concerning use in the future, either. Rather, it proposes that the current catalogue of exemptions regarding insider trading should instead be formu- lated as an exemption (1) for situations where inside information has not been used, and (2) for legitimate procedures that are covered by Article 9 of the Market Abuse Regulation (by referring to the above-mentioned Article). It is up to the defendant to prove that the exemption provision is applicable. The prohibition on trade included in insider offences will be expanded to also include cancellation or amendment of a placed order, if the cancellation or amendment is made after the person who placed the order gained access to insider information con- cerning the financial instruments. In addition, the prohibition on providing advice included in insider offences will be expanded in that a person who follows advice (or a recommendation) on acquiring or disposing of financial instruments is to be convicted of insider trading, if he or she knows that the advice is based on insider information. The same is to apply to a person who follows advice to cancel or change an order. However, the same exemptions that apply regarding insider offences in general – that insider informa- tion has not been used or that it is a matter of a legitimate pro- cedure – are also to apply in these cases. Apart from the Inquirys proposal that the classification otill- börlig marknadspåverkan (undue market influence) be changed to marknadsmanipulation (market manipulation), it is proposed that a special criminal classification of the gross offence, grov marknads- manipulation (gross market manipulation), be introduced. The Inquiry proposes that in other ways as well, the design of the criminal provision should be more in line with the Directive. One example is by ensuring that the provision, like the corresponding provision in the Directive, addresses actions that actually have the specified effect. This, however, does not mean that an action is exempt from punishment if it is not possible to prove that it actually sent misleading signs or affected the price, but was obviously intended to do so. In such cases, the action may be deemed to constitute attempted market manipulation. In addition the Inquiry proposes changing the scale of penalties for unauthorised disclosure of inside information to imprisonment for a maximum of two years, and for gross insider offences and gross market manipulation to imprisonment for a maximum of six years. The penalties in the Act on control of wholesale of energy products (2013:385) were designed using the Market Abuse Penalties Act as a model. It is therefore proposed that corresponding amend- ments to the scale of penalties be made in that Act as well. Proposals arising from the provisions of the Market Abuse Regulation As mentioned above, the prohibitions and orders of the Market Abuse Regulation are directly applicable in Swedish law, and no measures will be taken to transpose the material provisions of the Regulation. However, many of the Regulations provisions are con- tained in some form in the 2003 Market Abuse Directive. In other words, the provisions of the Regulation already have an equivalent, or in part, in Swedish law. to the chosen legal instru- ment, the Swedish provisions must now be adapted or removed from Swedish law. The Inquiry considers that it should be possible to keep the provisions in the Securities Market Act (2007:528) on market supervision in regulated markets and MTFs unchanged. However, as mentioned above, it is proposed that the provisions in the Market Abuse Penalties Act on reporting of suspected market abuse be abolished. The Inquiry also proposes abolishing the provisions on the obligation of issuers to publically disclose information that affects prices and the regulations on delayed public disclosure in the Securities Market Act. However, should make use of the opportunity to introduce a national provision that a written explanation on how the conditions for a delay were fulfilled is only to be submitted to the competent authority () if requested. The Inquiry proposes that the provisions on insider lists and notification obligations for insiders in the Act on Reporting Duty on Possession of (2000:1087) be re- moved from the Act. The same applies to the provisions in the same Act on a prohibition for these persons and stock market companies to trade, during certain periods, in financial instruments related to the company. Regarding the requirement on publication of transactions con- ducted by insiders, already has a well-functioning system in place for this. The Inquiry therefore proposes that should use the opportunity provided in the Market Abuse Regu- lation that publication is to be dealt with by the competent authority and that a corresponding provision to this effect be introduced in the new Act. The applicable provisions on the transparency register in the Act on Reporting Duty on Possession of can, with certain minor adjustments, be kept. How- ever, the Inquiry proposes that, as a result of the rules in the Market Abuse Regulation, the provisions on investment recommendations in the Act (1991:980) should be removed from the Act. The Market Abuse Regulation prescribes that the competent authority is obliged to establish efficient procedures for receiving reports regarding infringements of the Regulation. In the Inquirys view, implementation of this provision should be carried out at ordinance level in the form of a general provision that Finans- inspektionen is to set up a system of this kind. The Inquiry pro- poses that the Public Access to Information and Secrecy Act be supplemented with an absolute protection of confidentiality for information that reveals a notifiers identity. The obligation of professional secrecy is to have precedence over freedom of repor- ting. Confidentiality will apply for a maximum of fifty years.