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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):


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.


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

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