The Austrian parliament recently introduced a draft bill
amending certain provisions of the Austrian Stock Exchange Act
(Börsegesetz - BörseG) and the Austrian Securities Supervision Act
(Wertpapieraufsichtsgesetz - WAG). It will implement, among others,
EU Directive 2003/6/EC on insider dealing and market manipulation
(market abuse) (the Directive) and repeal the existing framework
(§§ 48a to 48c BörseG) in favour of a more elaborate regime.
Changes introduced by the new regime include the following
(references to the BörseG below indicate the new provisions):
Ambit
Although the existing regime only prohibits the misuse of inside
information for market professionals in the course of securities
trading (Wertpapierhandel) in respect of certain financial
instruments, the new regime is targeted at market professionals and
private investors alike and catches an increased range of financial
instruments (including commodity derivatives) to which the
prohibition of misuse of inside information and market manipulation
relates.
Statutory definition of key terms
Section 48a BörseG, which closely mirrors Art 1 of the
Directive, increases legal certainty by providing statutory
definitions of terms such as inside information and market
manipulation. Inside information is defined as information of a
precise nature that has not been made public, relating to one or
more issuers of financial instruments or to one or more financial
instruments, that, if made public, would have a significant effect
on the prices of those financial instruments.
Increased criminal sanctions
A core provision of the draft bill is § 48b BörseG, which
provides for aggravated criminal sanctions in case of a misuse of
inside information.
If an insider uses inside information with the intention of
taking pecuniary advantage of such information for their own
account or for the account of a third party, they could face
imprisonment for up to three years and, if the pecuniary advantage
exceeds €40,000 (£50,000), for up to 10 years. In case of a legal
entity, the natural person taking part in the decision to carry out
the transaction for the account of the respective legal person
qualifies as insider.
So far, persons other than insiders who have knowledge of inside
information and use it with the intention of taking pecuniary
advantage faced either imprisonment for up to one year or a fine.
Under the new regime, the term of imprisonment may be stretched to
up to five years if the pecuniary advantage obtained exceeds
€40,000.
The new regime also provides that criminal sanctions may even be
imposed if inside information is used without the intention of
taking pecuniary advantage, provided that the possessor of such
information knows or ought to have known that it is inside
information.
Market manipulation penalized
For the first time, market manipulation - that is, transactions,
orders to trade or dissemination of information through the media
that gives false or misleading signals in respect of a certain
financial instrument or raises the price of a financial instrument
to an abnormal or artificial level and that does not qualify as a
misuse of inside information - may also trigger administrative
sanctions.
Obligations of issuers of financial instruments
The draft bill further introduces disclosure obligations in
relation to inside information and notification obligations for
issuers of financial instruments or persons acting on their behalf.
These include, for instance, the obligation to draw up a list of
persons working for the issuer and having access to inside
information. This is to be transmitted to the regulator, the
Austrian Financial Markets Supervisory Authority
(Finanzmarktaufsichtsbehörde - FMA) upon request. Further, persons
discharging managerial functions within the issuer are obliged to
notify the FMA of any transactions with respect to shares in the
issuer or financial instruments linked to them conducted for their
own account.
Regulator's powers increased
Although criminal proceedings in connection with the misuse of
inside information fall within the exclusive jurisdiction of the
Vienna Regional Criminal Court, the FMA will be granted ex-tensive
supervisory and investigatory powers for supervising compliance
with the new re-gime, such as access to documents, a right to
information and a right to on-site inspection. These powers are
further strengthened by active involvement of the FMA in criminal
pro-ceedings.
Timeline
The Directive should have been implemented by October 12 2004;
Austria has apparently failed to undertake this implementation in
time. However, given that the draft bill will be for-warded to the
Federal Council (Bundesrat) (that is, the second chamber of the
Austrian leg-islative body) by November 5 2004, it is most likely
that the new regime will enter into force by year-end.
Martin Ebner and Ursula Rath