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EU Bares Teeth Against Corporate Market Abuse

(CN) - A bill by the European Commission to criminalize market abuse and insider trading heads to the full parliament after a unanimous vote in a key economic committee Thursday.

The commission first proposed making market manipulation and insider trading a crime in 2011, after guilty parties avoided sanctions in the wake of the economic collapse by taking advantage of the EU's current patchwork of 28 different member-state laws.

Some national authorities within the EU lack effective sanctioning powers, while other member states have never made insider trading and market abuse a crime, the commission noted.

Regulators made changes to the 2011 proposal a year later amid the LIBOR and EURIBOR benchmark interest manipulation scandals. The amendments prohibit benchmark interest manipulation and will make such exploits a crime through the EU.

In Thursday's vote, the European Parliament's economic and monetary affairs committee agreed to a defining list of market abuse offenses - including insider trading, unlawful disclosure of information and market manipulation. The committee also consented to a common set of criminal sanctions, fines and imprisonment for guilty parties.

Corporations can also be held liable for market abuses under the new scheme, according to the commission's statement.

"We welcome today's vote in favor of the commission's proposal, which confirms that Europe is willing to take all measures necessary to counter insider dealing and market abuse in its financial markets," commissioners Viviane Reding and Michel Barnier said in a joint statement. "We need to safeguard the integrity of our markets and protect the money of our citizens."

If passed by both the parliament and the Council of the European Union, member states will be tasked with policing and adjudicating national offenses. Those found guilty of insider trading or market manipulation could face four-year sanctions, while disclosing insider information could fetch a two-year punishment.

This is the first time the commission has used its new powers under the Lisbon Treaty to enforce EU policy through criminal sanctions, the agency said. The bill is part of a larger effort by the EU to unify its 28 national financial markets into a single, unified system.

In the U.S. last year, the Royal Bank of Scotland and its Japanese subsidiary paid $150 million to settle criminal charges for their roles in the LIBOR manipulation scheme. Barclays admitted to similar allegations in 2012.

The Justice Department has so far generated about $612 million in criminal penalties related to the LIBOR fiasco.

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