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Market abuse fact sheet

February 2004

Latest developments: February 2004

Some EU governments, including the French and the Swedish, are already known to be having trouble working out how to implement this legislation.  France, which has no existing self-regulation for the media will be obliged to follow MADID to the letter – and in Sweden the problem arises where MADID is in direct conflict with Sweden’s constitutional protections of media freedom.

EPC believes that the text of the implementing directive exceeds the EU’s powers to intervene in press freedom and constitutes a dangerous constitutional precedent.

EPC has written to Commissioner Bolkestein, outlining legal advice commissioned by the EPC, that has been elaborated by a lawyer specialising in European media and constitutional law. The media lawyer confirms that MADID, as it relates to financial journalism, breaches Articles 5 and 151EC, as well as Art. 10 of the European Convention on Human Rights. MADID also exceeds the competence provided by the sixth indent of Art. 6(10) and Article 17(2) of MAD as it modifies the essential provisions of the Directive and contains more than technical adaptations of MAD. This highlights that the problems are serious and must be resolved.

Whilst the EPC continues to wish to work with the Commission to explore ways of resolving these concerns, it is prepared to take legal action against a directive which has such serious implications for financial journalism.

One of the EPC’s favoured options is that the Commission might consider publishing supplementary guidance as to how Member States should implement the measures as they relate to the media. Even though such guidance would have no binding legal effect, Member States could be expected to take account of it when drafting their implementing legislation.

The issue: The Market Abuse Directive is due to be implemented by Member States by October 2004 and forms part of the financial services action plan due for completion by 2005.

The measure consists of two directives and one regulation.

This two-stage process represents the first ever use of the Lamfalussy Process whereby firstly primary legislation agreeing points of principle and objectives are adopted, then secondly expert committees, in this case the Committee of European Securities Regulators (CESR) and the European Securities Council (ESC), interpret the detail and decide on the implementation of the directive.

The original objective of the legislation was to prevent insider trading and was principally aimed at financial services professionals.  The EPC became involved in the consultation process when it soon became clear that the directive would have implications for financial journalism.

EPC has been concerned about two aspects in this EU directive on Insider Trading and Market Manipulation. Firstly to ensure that journalists could not be held criminally liable for innocent mistakes under the definition of market manipulation and secondly to ensure that editorial policy on fair presentation and disclosure is not set by EU regulation, leaving these aspects instead to self-regulation.

The Council adopted a Common Position in May 2002 which provided for some significant safeguards for journalists following persistent lobbying by EPC and the financial media. However, assurances made by Commissioner Bolkestein and officials working for him that the legislation would only impact journalists who make share tips have proved worthless.  This is because the committee responsible for stage two of the legislative process has since introduced new regulations specific to journalism in the implementing directive.

MAD itself also gave safe harbour from the legislation to financial journalists who were already subject to appropriate self-regulation.  MADID undermines this totally insisting that any self-regulation must be “equivalent to” and produce “similar effects to” regulation for investment firms – regulation that includes requirements such as disclosing sources and general presentation of news.

The EPC has sent its legal opinion to the Commission outlining the legal case against the directive that suggests that article 6.5 of the latest text of the implementing Market Abuse directive is in conflict with the level 1 text of the directive and in breach of certain articles of the EC Treaties – under the EU Treaty, legal competence for media content remains with Member States - as well as in conflict with article 10 of the European Convention of Human Rights.

The Commission has said that its primary target in this article is financial analysts and market traders. During the Parliament’s first reading the EP Rapporteur, Robert Goebbels insisted that this article would not catch media reporting and that there was no need therefore to introduce an amendment to exclude journalism. However, a new threat soon emerged following the publication of the Committee of European Securities Regulators’ (CESR) proposals for implementing measures of the directive, the content of which made the wording in the Common Position text totally inadequate in terms of protection of financial reporters. and now means that financial journalism in most member states will have to adhere to regulations set out in MADID regardless of existing self-regulatory codes of practice and national media regulation.

Concerns that the CESR proposals would subject financial journalism to new intrusive and unworkable regulation, effectively replacing existing self-regulatory regimes were partly addressed by a last-minute oral amendment tabled by EP Rapporteur Robert Goebbels during a second reading debate in committee. However, the text still left the financial services regulators (CESR) in the driving seat of media regulation. Although the amendment went some way to recognising media and journalist groups’ concerns, it left the CESR with delegated powers under the Market Abuse directive to impose a whole new layer of unnecessary and unworkable regulation on the media reporting industry – which they did indeed go on to do.

EPC, along with other trade organisations, presented the CESR with proposed revisions which would effectively exempt mainstream financial reporting from regulatory oversight in the directive.

The EPC proposal sought to clarify that, in CESR's revised guidelines, financial analysis and other mainstream news reporting would not be subject to that part of the directive on which CESR issued regulatory guidance.

EPC also wrote to the Chairman of CESR to seek his urgent clarification in relation to paragraph 103 of "CESR's Advice on Level 2 Implementing Measures for the Proposed Market Abuse Directive." One of the concerns raised by representatives of European newspapers and other media was the treatment of factual news reports of third party investment recommendations. Whilst assurances were apparently given by CESR and subsequently by the European Commission that it was not the intention that the CESR Level 2 advice would cover news reporting of this kind, this is in fact exactly what has come about in the final directive.

The Parliament’s role:

The European Parliament has largely worked hard to make amendments to protect journalists and the Parliament and Council adopted the market abuse directive in December 2002 to the satisfaction of the EPC.

However, back in November 2003, Parliament approved the ESC implementing directive which means that financial journalism is now directly affected by the legislation.

EPC’s current position:

The EPC’s main concern is that the transparency of markets will suffer as a result of this legislation as it currently stands. Cumbersome and intrusive rules on fair presentation and public disclosure will slow the speed and quality of information flow from news providers to markets, as journalists might be compelled to exclude information rather than risk criminal sanctions.  Existing self-regulation is under threat and financial journalists will be bound by legislation designed for financial analysts by experts with no experience or knowledge of EU media regulation.

One of the EPC’s criticisms is that the expertise of those who participated in the drafting of MADID lies in the field of financial services, and not in media regulation.  The EPC contests that there is no reason why financial services regulators should have the knowledge either of media regulation or of the detailed workings of journalism.  However, neither CESR nor the ESC were guided by a “media market practitioners panel” nor did they give the appearance of seriously trying to inform themselves of media regulations or the practical implications of their proposals as they related to the media.

EPC Position papers are available on request from angela.mills@epceurope.org.


Draft directive published May 2001
First Reading, European Parliament, 11-14 March 2002
Common Position adopted 7 May 2023
CESR proposal published July 2002
Second Reading, European Parliament Plenary vote: 7 November 2023
Text of the Implementing Directive on Market Abuse agreed: 29th October 2003
Deadline for transposing into national law, October 2004

Key players:

Commissioners Bolkestein, Reding. Officials: David Wright, Alexander Schaub
EP Rapporteur Robert Goebbels
MEPs Theresa Villiers, Chris Huhne, Pia-Noora Kauppi

Useful links:

For official information on the process to date, go to: http://europa.eu.int/comm/internal_market/securities/abuse/index_en.htm.


For further information:

FOR JOURNALISTS on this or other topics, please contact Heidi Lambert Communications on Tel: +44 1245 476 265 or heidilambert@hlcltd.demon.co.uk.

FOR EPC MEMBERS AND GENERAL ENQUIRIES please contact Angela Mills Wade on Tel: +44 1865 310 732 or angela.mills@epceurope.org.