Belgium: Belgium Completes Implementation Of New European Market Abuse Regime

Last Updated: 3 October 2017
Article by Vincent Jodard

Most Read Contributor in Belgium, August 2018

The Law of 31 July 2017 amending the Law of 2 August 2002 on the supervision of the financial sector and on financial services (the "Law of 2 August 2002") was published in the Belgian Official Journal on 11 August 2017 (Wet van 31 juli 2017 tot wijziging van de wet van 2 augustus 2002 betreffende het toezicht op de financiële sector en de financiële diensten/Loi du 31 juillet 2017 modifiant la loi du 2 août 2002 relative à la surveillance du secteur financier et aux services financiers - the "Law").

The main purpose of the Law is to implement into Belgian law remaining provisions of: (i) Directive 2014/57/EU of 16 April 2014 on criminal sanctions for market abuse (the "Market Abuse Directive") that had not yet been transposed in Belgian law by means of the Law of 27 June 2016; and (ii) Commission Implementing Directive 2015/2392 of 17 December 2015 on Regulation 596/2014 as regards reporting to competent authorities of actual or potential infringements of that Regulation (the "Notification Directive"). 

In particular, the Law: (i) introduces a whistle-blowing scheme, in accordance with the Notification Directive; (ii) amends the previous criminal regime applicable to market abuses; (iii) implements and fine-tunes specific powers of investigation of the Financial Services and Markets Authority ("FSMA") and other measures it may take in case of an infringement of Regulation 596/2014 of 16 April 2014 on market abuse (the "Market Abuse Regulation").

Whistle-blowing Scheme

  1. General Principles

The Law introduces a whistle-blowing scheme for notifications of possible or actual infringements of market abuse provisions and other offences that fall under the supervisory powers of the FSMA.

Pursuant to this new whistle-blowing regime, whistle-blowers will be protected against civil, criminal or disciplinary sanctions if their notifications were made in good faith. In addition, whistle-blowers will not be deemed to have violated confidentiality obligations and may therefore not be held liable in this regard. FSMA will also keep the identity of whistle-blowers confidential. This regime of protection only applies to notifications made to FSMA and will not apply to notifications made to other parties (e.g., press).

  1. Additional Protection for Employee-Whistle-blowers

The Law grants additional protection against retaliation, discrimination and other kinds of unfair treatment of employees who notify, in good faith, violations of market abuse provisions within the workplace.

If any sort of unfair treatment occurs following whistle-blowing, the burden of proof will lie with the employer, who will have to demonstrate that any treatment considered as unfair is not the result of whistle-blowing. Under specific circumstances (e.g., in case of dismissal), employee whistle-blowers will also be entitled to claim damages or request reinstatement in their function, while the person accused of a violation of market abuse provisions may only claim damages because of a loss actually suffered (notwithstanding any sanctions for committing the offense). Additional incentives may be granted to whistle-blowers by Royal Decree.

  1. Internal Notification Procedures for Whistle-blowers

All institutions registered with or licensed by FSMA or the Belgian National Bank will have to put appropriate internal procedures in place to implement this new whistle-blowing scheme.

Criminal and Administrative Sanctions

  1. Criminal Sanctions

The Law introduces key modifications to the criminal sanction regime previously in force under the Law of 2 August 2002.

  • The Law broadens the scope of application of the market abuse regime regarding persons, places and conduct, in line with the Market Abuse Directive and the Market Abuse Regulation. As a result, each legal entity and individual involved in the violation of market abuse provisions may be penalised. Furthermore, the general jurisdiction rules applicable to national criminal offences will apply to market abuse situations. Finally, the Law goes beyond the minimum standards set by the Market Abuse Directive by also criminally sanctioning an attempt to commit any type of market abuse.
  • The substantive scope of "insider trading" is broadened to include (i) the prohibition to cancel or amend an order on the basis of insider information or to advise another person to do so; and (ii) the prohibition of the use and transfer of recommendations or incentives to buy or sell financial instruments in case one knows or should have known that the recommendation or incentive is based on insider information. However, market surveys that are conducted in line with the Market Abuse Directive fall outside the scope of insider trading.
  • "Market manipulation" no longer requires the use of fraudulent means. A mere intent suffices (algemeen opzet/dol général). Also, the definition of market manipulation applies not only to transactions or the placing of an order, but also to any other activity or behaviour resulting in the manipulation of the market. However, the Law contains exceptions that apply to actions in line with market practices.
  • The maximum term of imprisonment for violations of applicable market abuse provisions has been increased from two to four years in case of market manipulation, from one to four years in case of insider dealing, and from one to two years in case of violation of the prohibition of unlawful disclosure of information. In addition, the perpetrator may be sentenced to pay a criminal fine amounting to a maximum of triple the proceeds gained as a result of the violation.
  1. Administrative Sanctions

In addition to criminal sanctions, administrative sanctions may also be imposed. However, the non bis in idem principle has to be respected if both criminal and administrative sanctions apply.

Powers of the FSMA

Under the previous regime, the FSMA was entitled to seize financial assets temporarily, unless such assets were located in a private residence. The Law now provides that the auditor of the FSMA is entitled to request the investigating judge to conduct a search of the premises (including private residences) and seize IT systems, documents, data and valuables that may contribute to revealing the truth regarding an alleged market abuse.

Furthermore, while the automatic prohibition on the exercise of professional activity was abolished, the FSMA may impose a temporary prohibition.

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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