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Market abuse

Market abuse undermines the trust in the financial markets with all the consequences that entails. This is why Dutch supervisors have increased their efforts to pursue and oppose practices such as price manipulation, tipping off and insider trading. Similarly, the inspection on compliance with the various notification and disclosure requirements has been intensified in recent years.

Market abuse is a dynamic doctrine within the law on securities. It is based on European legislation and has been incorporated in the (Dutch) Financial Supervision Act. In recent years, courts have given further substance to various forms of market abuse, including the use of inside information, price manipulation, tipping off inside information (ban on tip-offs) and providing investment advice without the requirements of the Financial Supervision Act being observed.

The Financial Supervision Act has various provisions that may be helpful to combat market abuse as effectively as possible. It includes notification and disclosure requirements under which managing and supervisory directors and issuing institutions are obliged to report the trade in financial instruments conducted by them and to disclose price-sensitive information of those issuing institutions.

Issuing institutions additionally have the obligation to compile an insider list, specifying the names of persons whose position allows them access to inside information. They could subsequently be banned from entering into transactions of certain financial instruments. The Financial Supervision Act also imposes a snitching obligation on investment companies. If an investment company suspects insider trading, it is obliged to inform the Netherlands Authority for Financial Markets (”AFM”), without informing its client.

Market abuse could lead to administrative law prosecution, in which case the enforcement measures will be adopted by AFM and an administrative fine may be imposed. Market abuse may also be prosecuted under criminal law and is then initiated by the Public Prosecution Office. A criminal court may impose a sanction.

The boundaries of market abuse are obscure and the applicable legislation and regulations complex. It is often the specific facts and circumstances that are assessed to determine whether or not market abuse has occurred. It is therefore very important to seek sound legal assistance at an early stage to prevent those boundaries from being transgressed. Our lawyers offer that support. Whether investment advice or price-sensitive information is involved, they will advise you how to act or advise you not to act. Our expertise comprises:

  • advice on mapping and assisting in notifications and disclosures of price sensitive information;
  • advice and information of market parties on investment advice;
  • advice on aspects of insider information;
  • compilation of insider regulations and provision of information to insiders;
  • provision of information and (detection) of market of use; and
  • legal assistance in disputes on market abuse.

Miriam van Ee