Changes in the Criminal Code: How am I affected?

Compliance Penal CodeChanges in the legal responsibility of legal persons in the field of market abuse and corruption

Implementing European Union regulations, LO 1/2019, of February 20, amendment of the Criminal Code, which came into force on March 13, 2019 has been approved. This modification of the Criminal Code significantly affects the financial markets and corruption. Consequently, this update will force to review the Criminal Compliance programs of the companies. With this brief note we indicate what has been introduced.

  1. MARKET ABUSE – ARTICLE 284 OF THE CRIMINAL CODE

From now on, the necessary elements of the crime of operative and informative manipulation will be the following:

  • That the benefit or damage caused by the conduct was greater than two hundred and fifty thousand euros, except in the case of the use of privileged information, which amounts to five hundred thousand euros.
  • That the amount of the funds used is greater than two million euros.
  • That it causes a serious impact on the integrity of the market.
  • Both crimes may be committed in a tentative degree.
  • Informative Manipulation: A specific reference is made to the use of the Internet and the new information and communication technologies, thus expanding the assumptions that may be constitutive of crime
  • Operational manipulation: It is not necessary that this crime be committed with privileged information. All kinds of information will constitute a crime.

2. PRIVILEGED INFORMATION – ARTICLE 285 OF THE CRIMINAL CODE

The acquisition, transfer or transfer of financial instruments, or the cancellation or modification of an order is criminalized, using privileged information to which reserved access had been granted, understanding that the reserved access is held by the member of the administrative, management or supervision of the issuer or the participant of the emission rights market, who knows it during the exercise of their professional or business activity, or in the performance of their duties, and who obtains it through a form of criminal activity.

3. ARTICLE 285 BIS, TER AND QUATER

Market prospecting is penalized through the use of privileged information. Both Spanish and European financial instruments are considered financial instruments. The preparatory acts are condemned, as well as the provocation, proposition and conspiracy.

4.  PRISON PENALTIES

Penalties are raised against natural persons for the crimes of market abuse and the use of privileged information, and also the penalties to apply to legal persons.  It is introduced through Article. 288.2 a) of the Criminal Code the fine of two to five years, or triple to five times the benefit obtained or that could have been obtained if the resulting amount were higher.

Therefore, by including legal persons as possible authors of a crime of market abuse and use of privileged information, the penalties provided in the article may be imposed. 33.7 CP, among which appear the dissolution of the legal entity, the suspension of its activities, the closure of its premises and establishments, the prohibition to carry out activities in the future in the context of which the crime was committed, the disqualification to obtain subsidies or public aid and judicial intervention.

5. PRIVATE CORRUPTION – ARTICLE 286 BIS

The introduction of the concept of “offer or promise” of obtaining for itself or for a third party any unjustified benefit or advantage is produced.

6. PUBLIC CORRUPTION-ARTICLE 286 BIS

There is an extension of the criminal liability of the legal entity to the crimes of misappropriation of public funds (Article 435.5 of the Criminal Code), which becomes part of the list of crimes that cause the criminal liability of the legal entity, in accordance with the article 31 bis of the Criminal Code.

This will especially affect companies that work with public institutions and companies.