Rogue traders in the European Union — including those abusing financial benchmarks such as Libor — will face tougher fines under rules approved Tuesday by the European Parliament.
The push for stricter rules comes in the wake of the global financial crisis following the collapse of Lehman Brothers bank five years ago.
“We are sending a clear signal that the EU is not a soft option or safe haven for perpetrators of market abuse,” said the Bill’s rapporteur, lawmaker Arlene McCarthy of the Socialists and Democrats.
She said the legislation, passed almost five years to the day since Lehman Brothers bank collapsed, brought the EU in line with the tougher sanctions imposed by the United States.
“Some financial commentators say that the culture which caused the crisis persists in the financial world,” McCarthy added.
The Lehman collapse, caused by highly speculative — but not necessarily illegal — trading in the housing market, is widely seen as a trigger for the global financial crisis.
“Immorality, opacity and rampant abuse” in the financial sector had to be “exposed and decisively punished,” said lawmaker Marisa Matias of the far-left GUE/NGL group. “Wearing a tie and working for a big company cannot be a ‘get out of jail free’ card.” Under the new rules, companies found guilty of market abuse will incur a fine of up to 15 per cent of annual turnover, or at least 15 million euros ($19.8 million), while individuals will face fines of up to 5 million euros and partial job bans.
The EU also plans to introduce criminal sentences for rogue traders, under a separate proposal to be negotiated by member states and the parliament from October.
The measures agreed to Tuesday also increase regulators’ powers and create new provisions for whistleblowers.
It aims to clamp down further on new markets, platforms and over-the-counter (OTC) trading in financial instruments, and address regulatory oversights relating to commodities and their derivatives, according to the European Commission.
The legislation also specifically addresses the manipulation of benchmarks such as Libor and Euribor, after a rate-rigging scandal rocked the British banking world last year and led to record high fines.
The commission is to introduce separate proposals next week on the further regulation of benchmarks.
Tuesday’s measures will become binding in tandem with other financial market regulations currently under review.