Austria: EU Market Abuse Regulation Countdown - Are You Ready? Part III: Sanctions - Austria Publishes Draft Implementing Bill

The new EU market abuse regime will take effect across EU member states from 3 July 2016 onwards. It will not only harmonise and enhance the EU regime on market abuse and extend it to trading venues beyond EU regulated markets, but will also increase the scope of existing offences and will provide for harsh sanctions.

Directive 2014/57/EU of 16 April 2014 on criminal sanctions for market abuse ("CSMAD")1, requires Member States to implement legislation to ensure that market abuse is a criminal offence which can be effectively punished. On 20 April 2016 Austria published a draft bill implementing the sanctions regime under the new EU market abuse regulation ("MAR")2 and CSMAD (the "Draft Bill"), cornerstones of which are set out be-low.

1. THE DRAFT BILL

On 20 April 2016 Austria published a draft bill implementing the sanctions regime under MAR and CSMAD.3 In accordance with MAR and CSMAD, the Draft Bill fore-sees certain maximum administrative pecuniary and criminal sanctions, criminal liability for legal entities, certain procedural requirements as well as special pro-tection for whistleblowers. MAR and CSMAD do not limit Member States to provide for more stringent sanctions and Austria is likely to make use of such discretion (see at 1.2 and 1.4 below).

Austrian criminal law distinguishes between administrative criminal law and judicial criminal law. The Draft Bill follows this "dual-track system" which is also rec-ommended by MAR and CSMAD and provides for both administrative4 and judicial criminal sanctions5 .These sanctions apply to both natural and legal persons, as is required by MAR and CSMAD.

1.1. Territorial application

As the Draft Bill does not provide for any specific rules regarding jurisdiction, but rather provides for a general commitment to ensure the application of the MAR in Austria, the general rules of the Austrian Criminal Code ("ACC") on jurisdiction will apply. The ACC applies to all offences committed in Austria. Pursuant to the ACC, an offence is committed (i) wherever the perpetrator has acted (ii) or should have acted or (iii) where a result required by the definition of the criminal act ensued (iv) or should have ensued according to the perpetrator's intentions. Therefore, it is not necessary that all elements of an offence, or the majority of the elements, are committed in Austria in order to establish Austrian jurisdiction. Even a minor nexus of the offence linking it to Austria would be sufficient. Further, the ACC provides jurisdiction to prosecute Austrian nationals for offences committed abroad, if the offence is punishable in the country where it was committed.

Austrian administrative penal law essentially provides for the same rules on jurisdiction, with the minor exception that the result of the criminal act actually has to occur in Austria. In practice this distinction will not be particularly relevant, since the place where the offence was committed (rather than the place where the result occurred) is relevant to establish jurisdiction under the offences pursuant to Art 3, Art 4 and Art 5 CSMAD (insider dealings, disclosure of inside information and market manipulation). Therefore, the Austrian authorities will generally only prosecute offences which are committed in Austria or which are committed abroad by an Austrian citizen.

1.2 Criminal Sanctions under the Draft Bill

1.2.1 Pursuant to the Draft Bill only serious cases of insider trading or unlawful disclosure of inside information shall constitute a criminal offence going forward. Under the current Austrian rules, every violation of insider rules constitutes a criminal offence.

1.2.2 Pursuant to the Draft Bill serious cases of market manipulation shall constitute a criminal offence going forward. Currently market manipulation constitutes an administrative offence only. Under the Draft Bill, cases shall be deemed serious if either

  1. the volume of a transaction exceeds EUR 1m (in case of insider trading, market manipulation or use of inside information by cancelling / amending orders or by submitting/modifying or withdrawing a bid of emission allowances or other auctioned products), or
  2. the price of the respective financial instrument on the most relevant market (in terms of liquidity), fluctuates by at least 35 % and the aggregate turnover of such instrument exceeds EUR 10m, within five consecutive trading days from the inside information becoming public (in the case of recommendations or inducements to engage another person in insider dealings and unlawful disclosure of inside information);

Remarkably, the above criteria depart from the criterion typically triggering higher penalties under Austrian criminal law which is reference to the financial advantage gained. Pursuant to the legislator's intent, this shall ensure a clear split of responsibilities between the prosecutor / court (in case of criminal offences) and the FMA (in case of administrative offences) from the outset of an investigation.

1.2.3 Pursuant to the Draft Bill the maximum term of imprisonment will be more stringent than under CSMAD: it will be up to five years (in the case of insider dealing and market manipulation) or up to three years (in the case of unlawful disclosure of inside information).

1.3 Administrative sanctions and measures under the Draft Bill

1.3.1 The administrative sanctions set forth under the Draft Bill do not go beyond those set out in Art 30 para 2 lit h-j MAR.

1.3.2 Administrative measures that the regulator may impose (such as eg withdrawal or suspension of a firm's authorisation) pursuant to the Draft Bill do not go beyond those set out in Art 30 para 2 lit a-g MAR.

1.4 Illustrative overview of (planned) implementation

Please click here to view a table which provides a short overview over the main MAR/CSMAD provisions and their (planned) implementation into Austrian law.

2. NEXT STEPS

The Draft Bill is now subject to consultation, with the consultation period ending on 13 May 2016. We will monitor the legislative process and will provide updates on any significant developments. In the meantime, please contact us for further details.

Footnotes

[1] Find here.

[2] Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC, here

[3] Available in German only here

[4] Sec 48a – 48j Austrian Stock Exchange Act (Börsegesetz, "BörseG").

[5] Sec 48k – 48w BörseG.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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