May 15, 2021

The Penal Code toughens prison sentences and limits for using privileged information | Markets

The Penal Code toughens prison sentences and limits for using privileged information | Markets



The reform of the Criminal Code that approved The congress in December for adapt it to European legislation in the treatment of crimes of abuse of the market already has been published in the BOE. The Organic Law 1/2019, by which the Penal Code is modified, supposes the transposition of several European directives, among others some dedicated to the penal sanctions applicable in cases of abuse due to market manipulation or use of privileged information, crimes for which they will apply harder sanctions than those provided for in the legislation so far in force, and they will also be considered lower benefit limits to be considered a serious crime. The reform of the penal code will take effect within 20 days.

In particular, the regulation modifies the articles 284 and 285 of the Criminal Code, which already sanctioned criminal behavior for the use of privileged information and market manipulation, but did not cover all the cases included in the European standard and the penalties were lower.

The transposition of Directive 2014/57 / EU on the sanctions applicable to market abuse contemplates three differentiated criminal types: "transactions with privileged information, including the recommendation or inducement to another person to conduct transactions with privileged information, the illicit communication of privileged information and market manipulation."

Specifically, in the most serious behaviors of market manipulation and conducting transactions with privileged information, they are configured as crimes susceptible to being punished by imprisonment and disqualification.

Penalties for some of these more serious crimes are raised, as they go from a maximum of two years in prison to six years. Thus, Article 284 states that "the penalty of imprisonment from six months to six years, a fine of two to five years, or both to three times the benefit obtained" will be imposed in addition to special disqualification to intervene in the financial market.

As for the benefit limit obtained with the alleged illicit operations, it is reduced from 300,000 to 250,000 euros. It also includes the assumption that the amount of the funds used was greater than two million euros.

Regarding article 285 of the Criminal Code, which until now imposed penalties of between one to four years in prison for the use of privileged information that suppose a benefit or harm of more than 600,000 euros, both penalties and limits are now hardening. The benefit or damage of transactions with privileged information is reduced by the amount of 500,000 euros. And the sanction also rises, since the new wording includes "the penalty of imprisonment from six months to six years, a fine of two to five years, or both to the triplo of the benefit obtained".

If the person in charge of the operations was a worker or employee of an investment services company, credit institution, supervisory or regulatory authority, it will be considered a greater penalty, within the range.

Likewise, the text includes the criminal liability of companies when they benefit from the infringement, either individually or as part of a collegiate body

The norm was approved in December with the support of PP, PSOE, Ciudadanos and PDeCAT and the abstention of United We Can, Republican Esquerra and PNV.

The EU directive was 2014 (Directive 2014/57). In the absence of transposition, the European Commission had initiated the formal infringement procedure in 2016. The approved norm indicates that given the "advanced state" of said procedure, the "immediate" adaptation to said directive of the Spanish system was urgent.

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