1. In General
The new Securities Market Act and related laws were initially scheduled to enter into force 1st July 2012, but the decision has been postponed to autumn 2012.
2. The purpose of amendments relating to sanctions
The law is intended to be amended in order to make the sanctions better correspond to sanctions of other EU member states, taking into account current and upcoming EU-legislation. The purpose is to make the sanctions functional and effective in relation to the act in question. The sanctions in other member states, like e.g. United Kingdom, France, Germany and Sweden, are much more severe than those in Finland.
As of today, the Financial Supervisory Authority (hereinafter "FSA") may impose the following administrative sanctions: conditional fines, administrative fines, public reprimands, public warnings and penalty payments. One of the FSA's many tasks is to supervise compliance with legal provisions concerning financial markets. Hitherto, the FSA has imposed a few administrative sanctions every year, but no penalty payments. One purpose of the amendments to sanctions is to ensure that mild consequences for forbidden actions and the low use of administrative sanctions do not give an advantage to parties not following the regulations over parties applying the regulation.
The amendments regarding sanctions are meant to emphasise the FSA's obligation to act as a supervisory authority. The purpose of the amendments is to make the administrative sanctions more applicable and to expedite and encourage the use of them. The current regulation requires authorities to meet many criteria before being authorised to use their right to impose penalty payments. The new regulation will obligate the FSA to, as a main rule, use administrative sanctions when applicable.
Amendments to change the scope of essential elements of an offence have not been considered necessary. The purpose is to increase the risk of getting caught for violating regulations regarding the financial markets and to ensure that neglecting the regulations is not financially beneficial. The administrative sanctions would not remove the liability for eventual compensations.
3. Changes regarding sanctions
One of the changes to the administrative sanctions is the removal of the public reprimand. The public warning will be the primary sanction in all situations other than that of administrative fines and penalty payments.
The administrative fine is intended to be used in less severe cases than the other administrative sanctions. The administrative fine is intended to be an "automatic" sanction imposed when the requirements by law are fulfilled. The Government Bill (HE 32/2012 vp) names as example a situation when neglecting the time frames regarding the disclosure obligation regulated in Chapter 7 of the new Securities Markets Act. The administrative fine for legal persons will be increased to 5 000 – 100 000 € and for natural persons to 500 – 10 000 €. The amounts of fines are increased mainly for preventive purposes and in order to provide the FSA with appropriate tools for indicating the blameworthiness of the action.
According to the proposed law, the FSA may issue a public warning to a supervised entity or actor on the financial markets, who deliberately or by neglect acts in violation of the relevant regulations. The public warning is intended to be used in response to violations more severe than those requiring an administrative fine. In practice, however, there may be cases where the administrative fine constitutes a more severe consequence for the affected party.
The penalty payment is intended to be the most severe administrative sanction. It is proposed that the applicability of the penalty payment be widened to encompass some other regulations of the financial market besides the Securities Markets Act. The amount of the penalty payment regarding legal persons will be increased so that the maximum amount of the penalty payment would be 10 % of the revenue the year before the violation, not exceeding 10 million euro (€). Regarding natural persons, the maximum amount of the penalty payment would be increased to 10 % of the latest taxable income, not exceeding 100 000 euro (€). According to the new Securities Markets Act, the FSA would be entitled to impose penalty payments to a maximum amount of 1 million euro (€). The Market Court would impose the payment of even greater amounts upon request by the FSA.
If the violating act or neglect is not aggravated but fulfils the requirements in chapter 51 of the Criminal Code the FSA may, in some situations, impose a penalty payment instead of initiating a criminal investigation. In these cases, the violation in whole has to be considered to have been made in mitigating circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.