Banking and Finance

Proposal to amend Dutch rules on insider trading

On 13 October 2004 a bill has been introduced with parliament for the amendment of the Dutch rules on insider trading. The bill seeks to implement the Market Abuse Directive (2003/6/EC). The bill will increase the burden of proof on the public prosecution service. The bill further limits the duty to notify transactions, introduces a prohibition of market manipulation and a duty on securities institutions to report possible breaches of the insider trading regulations. The Netherlands Authority for the Financial Markets (AFM) expects the bill to come into effect in the summer of 2005.

After implementation the prohibition to effect transactions while in the possession of inside information will be limited to cases where the relevant party can be deemed to "use" such inside information. This requires proof of a relation between the inside information and the transaction that is entered into. A limited group of primary insiders is deemed to know that the information they posses constitutes inside information. This group involves - in short - executive and non-executive directors of the relevant issuer, shareholders with an interest in access of 25% and persons with access to inside information in the conduct of their profession or function. In respect of others (so-called secondary insiders) the public prosecution service should prove that they knew or reasonably should have suspected that the relevant information constitutes inside information.

The obligation to notify transactions in securities will no longer apply to the issuer itself, the executive and non-executive directors of large subsidiaries of the issuer and large shareholders. The bill introduces a new prohibition on market manipulation. Market manipulation is described as influencing the free formation of price through supply and demand and can consist of spreading incorrect information or the conduct of transactions that disturb the market. Under the bill security institutions which suspect a violation of the prohibition on insider trading or market manipulation are obliged to notify the AFM.

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