The European Parliament has voted to back proposals under which companies found guilty of rigging market benchmarks like Libor could be fined equivalent of 15% of their turnover.
The new rules voted through on Tuesday include stronger powers for regulators, stronger sanctions – including a permanent ban on perpetrators, a move towards a cross-border surveillance system and greater protection for whistleblowers.
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The law, due to come into action within two years, revises market abuse rules to make the rigging of benchmarks illegal.
The market abuse rules are also extended to cover electronic trading such as high-frequency trading, criticised by some lawmakers for creating volatility in markets.
These new rules will close the Libor loophole and ensure all such benchmarks and indices are covered in the law. This law will close the gap and delivers a clear signal that the EU is not a soft option or safe haven for perpetrators of market abuse.
Penalties have also been toughened up so that companies liable of abuses could be fined up to 15% of their annual turnover or 15 million (US$19.9 million), with individuals fined up to 5 million and banned from the industry.
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By GlobalDataArlene McCarthy, the British Parliament’s rapporteur on insider dealing and market manipulation, said: "The Libor scandal was market manipulation of the worst kind. We are seeing more alleged and potential manipulation of benchmarks in energy markets such as oil and gas and foreign exchange markets."
The EU also plans to introduce criminal sentences for rogue traders, under a separate proposal to be negotiated by member states and the parliament from October 2013.
