Select Committee on European Scrutiny Twenty-Second Report




COM(01) 281

Draft Directive on insider dealing and market manipulation (market abuse).

Legal base:Article 95 EC; co-decision; qualified majority voting
Deposited in Parliament:20 June 2001
Department:HM Treasury
Basis of consideration:Minister's letter of 11 February 2002
Previous Committee Report:HC 152-ix (2001-02), paragraph 2 (5 December 2001)
Discussed in Council:No date set
Committee's assessment:Legally and politically important
Committee's decision:Cleared, but request to be kept informed


  16.1  On 5 December, we left uncleared two documents relating to the regulation of the European securities markets, pending receipt of further information. The first document covered new public issues of securities to be issued throughout the EU on the basis of a single prospectus instead of prospectuses being produced to satisfy up to 15 different sets of regulations; the second document covered EU common standards against market abuse. The documents were especially important because they were the first pieces of draft legislation from the Commission to follow the streamlined process for approving by the end of 2003 legislation on financial regulation as recommended by the Lamfalussy Committee.[37]

The Minister's letter

  16.2  In her letter of 11 February 2002, the Economic Secretary to the Treasury (Ruth Kelly) updates the Committee on the Directive on insider dealing and market manipulation (market abuse). She says that the negotiations have made rapid progress and mentions that changes to the text enabled the Government to support an agreement on a general orientation in respect of the Directive at ECOFIN on 13 December. She adds that these changes covered the definition of market manipulation in Article 1 and, in the Government's view, provided a balanced interpretation that would be effective in tackling market abuse without hampering legitimate activity. The other change related to the territoriality provisions in Article 10 and the co­operation procedures in Article 16, which were amended to permit countries where there had been market abuse to take action against an alleged abuser regardless of the location and to encourage co­operation between national regulators.

  16.3  The Minister also notes that reports made following the attacks of 11 September that terrorists had benefited financially by manipulating financial markets proved to be unfounded.


  16.4  In December we expressed concern about the Lamfalussy procedures having the potential to allow poorly-drafted legislation to be adopted without adequate consultation and reflection. We also requested an update on negotiations. The Minister has replied with information on the latest developments concerning the market abuse directive. We are pleased that the negotiations have made rapid progress and a number of the concerns have been addressed.

  16.5  We thank the Minister for her further information. We clear the document, but we ask her to keep us informed of developments.

37   A description of the legislative structure recommended by the Lamfalussy report was published in our Report of 5 December 2001: (22467) 9674/01, (22473) 9763/01; see HC 152-ix (2001-02), paragraph 2. The Lamfalussy report was published in February 2001 and was cleared by us on 18 July 2001: (22154) 6554/01; see HC 152-i (2001-02), paragraph 24. Back

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