No C 35/22 Official Journal of the European Communities 8. 2. 88 
The development of regional policy theory, the new 
ERDF Regulation, the Single Act, and the proposed 
reform of structural fund resources certainly provide 
Done at Brussels, 16 December 1987. 
1. General comments 
1.1. The Commission's intention to co-ordinate the 
regulations on insider trading in the European Com­
munity through a Council Directive is supported in 
principle. Differences in national insider trading regu­
lations, or the absence of such regulations, hamper the 
completion of a European capital market by 1992, 
jeopardize equality of opportunity for investors in gen­
eral and protection for savers, and make it more diffi­
cult to expose cross-border misuses of inside know­
ledge. 
1.2. While it is recognized that the current West 
German voluntary code on insider trading is effective, 
it is thought that such an arrangement cannot be trans­
ferred to all EEC countries. Two things lead us to the 
conviction that binding regulations at EEC level are 
more desirable than a voluntary code: 
— the Commission's Recommendation of 25 July 1977 
on a European code of good conduct for securities 
trading has not had the success that was hoped for, 
and 
0) OJNoC 153, 11.6. 1987, p. 8. the means and the opportunity for greater convergence, 
fostering the political will which is vital if the problems 
are to be solved. 
The Chairman 
of the Economic and Social Committee 
Alfons MARGOT 
— on the EEC's most important and experienced 
financial market, the London Stock Exchange itself 
pushed for legally binding regulations instead of the 
former City Code; these came into force in 1981. 
The Commission has therefore understandably mod­
elled its proposal on British and French insider trading 
legislation, although it goes further than British law, 
which raises certain questions (see point 1.3). 
1.3. In principle, we support the Commission's con­
cern to introduce Community-wide laws on insider 
trading and abandon voluntary codes of conduct, which 
are only obeyed by companies and/or persons which 
agree to do so. Such a concern is in keeping not only 
with the British and French insider trading legislation 
already mentioned, but also addresses considerations 
which have been mooted in other Member States— 
such as Ireland, Belgium and Luxembourg—with the 
aim of punishing insider trading by criminal law. 
1.4. The Commission is asked to see whether insider 
trading can be prevented in yet another way than by Opinion on the proposal for a Council Directive co-ordinating regulations on insider 
trading (!) 
(88/C 35/10) 
On 29 June 1987 the Council decided, under Article 54 of the EEC Treaty, to ask the 
Economic and Social Committee for an Opinion on the abovementioned proposal. 
The Section for Economic, Financial and Monetary Questions, which was responsible for 
the preparatory work, adopted its Opinion on 8 December 1987. The rapporteur was Mr 
Meyer-Horn. 
At its 251st plenary session (meeting of 16 December 1987), the Economic and Social 
Committee unanimously adopted the following Opinion: 
8. 2. 88 Official Journal of the European Communities No C 35/23 
existing laws and the issuer's obligation to inform in 
Article 7 of the proposal. 
1.5. It would be in the interests of legal protection 
and a standardized incorporation of the proposed direc­
tive into national law if the Commission, by way of an 
explanation, gave examples of inside information and 
its misuse, at least in the explanatory memorandum or 
recitals. Having such concrete examples would make it 
easier to interpret the definitions in the same way in 
the individual Member States, as the key concepts of 
an 'insider' and 'inside information' are too vague. 
1.6. It is suggested that the Commission be given the 
possibility of starting talks with a view to getting its 
insider trading regulations applied in countries such 
as Switzerland, Japan and Liechtenstein, which, while 
being important players in the international capital 
market, have less comprehensive, or even no laws of 
this kind; such action was taken as regards the agreed 
mutual recognition, in certain cases, of the EEC rules 
on stock exchange listing particulars. 
The proposed Convention of the Council of Europe 
due to be concluded at the beginning of 1988 could be 
useful in fostering co-operation between the appropri­
ate authorities, embracing even countries outside the 
EEC. It is therefore suggested that the European Com­
munity sign this Convention. 
Other bodies could also be involved in such co-oper­
ation, e.g. the Arbeitsgemeinschaft der Deutschen Wert-
papierborsen in the Federal Republic of Germany. 
1.7. Finally, a ban on the use of inside information 
can best be made to stick if all EEC countries punish 
violations of the proposed directive in a similar manner. 
As the European Community has no powers to impose 
penalties under criminal law, Article 11 virtually gives 
the Member States the power to determine how they 
shall penalise violations of the measures taken pursuant 
to the proposed directive. It seems a good idea for the 
Community to use its influence here to bring about 
equivalent penalties (i.e. not have one country impose 
small fines and another hand out prison sentences), 
and an even better one to do so within the Contact 
Committee and the framework of co-operation and 
agreement provided for in Article 10, calling in the 
European Court of Justice if necessary. 
If the proposed Directive (in Article 4) expressly allows 
individual Member States to lay down or retain more stringent rules, insider trading would be dealt with 
differently, despite EEC-wide regulations. 
Differences in penalties and in application may lead to 
a situation in the future—i.e. after the internal market 
has been completed and more and more securities are 
listed on most of the EEC stock exchanges—where 
insider trading may escape punishment in countries 
with relatively low penalties which apply the proposed 
directive to the letter but no more. But it is to be hoped 
that firms will voluntarily refrain from issuing their 
securities on exchanges where insider trading penalties 
are most lenient. 
2. Specific comments 
Article 1 
a) In covering persons who acquire inside information 
in the exercise of their profession or duties, the 
Commission has chosen a definition which goes 
further than the most usual concepts in business, as 
for example in Article 449 of the new Portuguese 
commercial law code or in the German rules on 
insider trading. 
b) It is therefore suggested that Article 1 (1) be re­
drafted more precisely as follows: 
'Member States shall prohibit any person who, in 
the occasional or regular performance of services 
in or for a company, acquires unpublished inside 
information about this company or another whose 
securities are admitted to stock exchange listing or 
regulated trading (open market or interbank) from 
using such inside information to buy or sell securit­
ies of the companies concerned, either directly or 
through another person, in order to gain a particular 
advantage for himself or for third parties on the 
basis of the inside information.' 
c) It is suggested that the Commission examine the 
possibility of including trading on 'when issued' 
terms in rights to an allocation of securities (e.g. 
when a company is re-organized or privatised). 
d) The idea of territory as understood by the proposed 
directive obviously does not cover areas where 
special laws apply—such as the Channel Islands. 
For such areas, to which insider trading could be 
diverted, suitable solutions would have to be found 
which would enable the directive to be applied there 
too. 
e) The exemption for dealings outside a stock 
exchange without the involvement of a professional 
intermediary is approved; indeed such an exemption 
could be justified where the parties involved knew 
No C 35/24 Official Journal of the European Communities 8. 2. 88 
each other personally (face to face) and could pro­
vide written assurances concerning inside know­
ledge if necessary. The protective requirements are 
therefore different from those needed in the case of 
anonymous stock exchange deals, and there would 
be the possibility of a recourse to civil law. 
Article 2 
The extent of the provision in the first indent is difficult 
to check, because it is not always evident which inside 
information is disclosed in the normal course of one's 
profession to third parties, and which is not. 
What is more, it is doubtful whether the law can pro­
hibit the mere passing on of inside information—in­
cluding cases of carelessness. 
Article 3 
The wording of Article 3 (1) ('knowingly' obtained 
inside information) should be changed to 'who is aware 
of the fact that he has obtained inside information from 
a person'. 
One should consider the possibility of wording 
Article 3 (2) in such a way that the chain of persons 
who can be punished for passing on inside information 
does not end with the so-called 'secondary insiders' but 
is continued further. 
Article 4 
This Article authorizes the Member States to lay down 
more stringent rules than those contained in the pro­
posed Directive provided that they are non-discrimi­
natory. 
Two remarks are called for here. 
Firstly, the possible adoption of more stringent rules 
jeopardizes the proposed Directive's aim of harmon­
ization. Secondly, it is not clear exactly what is meant 
by 'non-discriminatory'. One wonders what cases are 
intended to be covered by the term. 
Article 5 
If the definition of transferable securities is to be made 
as broad as possible, it should also include, as well as 
shares and debt securities, convertible bonds and other 
new hybrid instruments, such as participation certifi­
cates; in the German version, mention should be made 
of 'Wertpapierborsen' or 'Wertpapiermarkten' rather 
than 'Borsenmarkten'. 
Article 6 
The definitions introduced here of 'information ... of a 
specific nature' and 'likely to have a material effect' 
on a security's price are not sufficiently clear for all 
countries, especially as acts punishable under criminal law. Instead of 'unknown to the public' it would be 
better to speak of 'unpublished' or 'unpublicized' infor­
mation. 
Article 7 
a) In Article 7 (1), after the words 'circumstance or 
decision', the words 'concerning the company and 
known to its officers' should be inserted, because 
this perhaps is not made known even, for instance, 
in a management buy-out. 
— The obligation in Article 7 (1) on issuers to 'immedi­
ately' inform the public of any circumstance or 
decision likely to have a material effect on the 
price of their securities goes further than the Stock 
Exchange Listing Directive No 79/279/EEC of 
5 March 1979. Firstly, it should be made clear that 
such facts or decisions should 'concern the com­
pany' and be made known 'as quickly as possible' 
(instead of 'immediately'). Secondly, every company 
would have to make known as quickly as possible, 
any business decisions, even before they were acted 
upon. Article 7 (2) offers no relief from this obli­
gation. 
— It is therefore proposed that this Article be re­
drafted and that the more satisfactory text of 
point 5 a) in schedule C of Directive 79/279/EEC 
of 5 March 1979 be adapted, i.e.: 
'The company must inform the public as soon as 
possible of any major new developments in its 
sphere of activity which are not public knowledge 
and which may, by virtue of their effect on its assets 
and liabilities or financial position or on the general 
course of its business, lead to substantial movements 
in the prices of its shares'. 
b) It is doubtful whether a 'competent authority' has 
the expert knowledge, experience and powers of 
judgement to be in a position—as called for in 
Article 7 (2) of the present proposal and in the 
Directive of 17 March 1980—to decide the question 
of immediate publication of a business decision, 
which is already very difficult for a company. The 
involvement of such an authority (and other bodies 
consulted by it) also widens the circle of persons 
having access to inside knowledge. 
This might bring about the exact opposite form what 
Article 7 (1) is designed to achieve i.e. preventing the 
misuse of inside knowledge through the rapid publi­
cation of information. The obligation of professional 
secrecy in Article 9, which would apply to the com­
petent authority involved, cannot entirely remove the 
misgivings about the provisions of Article 7. 
— It would be better to leave it up to the company 
itself to decide when to make known the infor­
mation referred to in Article 7 (1). If it turns out 
8. 2. 88 Official Journal of the European Communities No C 35/25 
that the company has delayed unduly, the authori­
ties should have the possibility of taking sanctions 
against the company such as public criticism, tem­
porary suspension from stock exchange listing, etc. 
Article 8 
The co-operation of the competent authorities provided 
for here (who are to be given such 'supervisory powers' 
as may be necessary), taken together with the extension 
of the responsibilities of the Contact Committee set up 
by the Directive of 5 March 1979, which is provided 
for in Article 10, is a good idea, as it removes the need 
for a special European authority. 
Article 11 
As the EEC Treaty provides no foundation for imposing 
penalties under criminal law, one wonders to what 
extent the Member States can be obliged under 
Article 11 to determine the penalties to be applied for 
infringement of the measures taken pursuant to the 
Done at Brussels, 16 December 1987. 
1. General comments 
1.1. In point 55 of its White Paper on completing the 
internal market by 1992, the Commission announced a 
proposal on the approximation of Member States' arms 
legislation. According to the explanatory Memorandum proposed Directive. The Commission should explore 
every possibility offered by the Contact Committee 
under Article 10 and, if necessary, by recourse to the 
European Court of Justice to ensure that violations are 
penalised in a comparable manner from country to 
country, and not in a completely different fashion. 
Otherwise, insider trading would be switched to Mem­
ber States where penalties were comparatively lower. 
Article 12 
The timing and content of the proposed Directive 
should be aligned on that of the Commission's proposal 
for a Directive on investment advisers. Inside infor­
mation not covered by Article 6 of the present proposal 
could, if necessary, be dealt with in the latter proposal. 
Perhaps worth thinking about is the publication of 
personally addressed share information services or 'hot 
line' investment tips or stock market information ser­
vices based on supposed inside knowledge or deliberate­
ly misrepresented as such in order to offload the costs 
of the publisher's own dealings on to his 'subscribers'. 
The Chairman 
of the Economic and Social Committee 
Alfons MARGOT 
of document COM(87) 383 final, the establishment of 
the internal market will result, as provided for in the 
White Paper, in 'the removal of physical barriers'. The 
guarantees currently afforded by the possibility of car­
rying out border checks will have to be replaced on 31 
December 1992 at the latest by guarantees based on Opinion on the proposal for a Council Directive on the control of the acquisition and 
possession of weapons 
(88/C 35/11) 
On 21 September 1987 the Council decided to consult the Economic and Social Committee, 
under Article 100 A of the Treaty establishing the European Economic Community, on the 
abovementioned proposal. 
The Section for Social, Family, Educational and Cultural Affairs, which was responsible for 
preparing the Committee's work on the subject, adopted its Opinion on 10 December 1987. 
The rapporteur was Mr van Dam. 
At its 251st plenary session (meeting of 19 December 1987) the Economic and Social 
Committee adopted the following Opinion by a majority, with 11 abstentions: