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Earlier this year the European Commission proposed the introduction of a new directive on market abuse. The proposed directive deals with insider dealing and market manipulation, and the definition of these activities is large enough to ensure that new abusive practices will fall under its scope of application.

The Insider Dealing Directive (89/592/EEC) of November 13 1989 was implemented in Belgium by the statute of December 4 1990 on financial transactions and financial markets. However, as a result of changes in the financial markets and in European legislation, some of the Directive's provisions had to be updated. For instance, as a result from the adoption of the Investment Services Directive, the definition of inside information will be extended from transferable securities to financial instruments. This extension, however, will have no impact on the Belgian definition of privileged information, which refers to securities or other financial instruments in the sense of Annex B of the Investment Services Directive.

Unlike the Insider Trading Directive, the proposed Directive on Market Abuse will apply to all transactions involving financial instruments, irrespective whether those transactions take place on regulated markets.

Belgian law, however, will have to be modified with respect to the supervision of market abuse practices. The proposed Directive requires member states to designate a single supervisory authority. At present, Belgian law distinguishes between first-line and second-line supervision. The market authorities carry out the first-line supervision and are responsible for both the organization and supervision of secondary markets. The market authorities are themselves subject to second-line supervision by the Banking and Finance Commission. It is very likely the market authorities will be deprived of their supervising role under the new Directive. Indeed, the Belgian Minister of Finance has announced that the Banking and Finance Commission will replace both first- and second-line supervision. As a result, the different market authorities will only be responsible for organizing the different markets.

Hugo Keulers and Nele Nys

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