On 29 September 2018, Decree no. 107 of August 10, 2018 (the Decree), which amends the Italian legislative provisions to transpose the Market Abuse Regulation no. 596/2014 (the MAR ) in Italy, will enter into force.Inter alia, the Decree adds a new chapter to the longstanding debate over the Italian dual-track system and its compatibility with the double jeopardy (ne bis in idem) principle.

The MAR entered into force in Italy on 3 July 2016.

Law no. 163 of 25 October 2017 included a delegation to the Government for the implementation of European Directives and the implementation of other acts of the European Union and in particular for the adaptation of the national legislation to the provisions of the MAR.

The Decree has amended Legislative Decree no. 58 of 24 February 1998 (the Italian Financial Services Act or TUF) to the provisions of the MAR in order to avoid an overlapping of legislation and guarantee a harmonised regulatory framework on the market abuse aspects.

The Decree

The main legal amendments made by the Decree to the TUF are listed below:

A. Reporting requirements

(i) Amendments to Article 114 (Communication to the public):

  • A cross reference to Article 17 of the MAR as to the nature and modalities for the communication of the information and powers to the listed companies with regard to the controlled entities have been included;

  • the Article has been aligned to Article 17 of the MAR according to which Member States may provide that any information on delays is given only if this has been requested by the competent authority and Article 19 of the MAR Relating to transaction made by persons who perform administrative, management and control functions in the issuers have been deleted. Furthermore, it has been introduced the concept of “persons closely linked to the aforementioned subjects”, to be identified by CONSOB;

(ii) Amendments to Article 115 (Communication to CONSOB):

  • The application of this Article has been extended also to issuers, including foreign ones, that have requested or authorised the admission to trading of financial instruments of its own issue on an MTF or an OTF;

(iii) Amendments to Article 116 (Financial instruments disseminated among the public):

  • The legislative amendment envisaged by the Decree provides that issuers of financial instruments disseminated among the public shall inform the public of the facts that are not in the public domain directly concerning these issuers without delay and that if they are made public, they could have a significant effect on the value of the financial instruments of their own issue, assigning to CONSOB the power to establish the methods for informing the public and cases of exemption from compliance with the aforementioned disclosure obligations, if the issuers are in any case held to the obligations foreseen by the MAR;

(iv) Amendments to Article 132 (Treasury shares):

  • The application of this Article has been extended also to purchases of treasury shares made by issuers who have requested or authorised the trading of own shares issued on an Italian multilateral trading system, or from subsidiaries.

B. Sanctions

(i) Amendments to Article 172 (Criminal sanctions relating to the irregular purchase of shares):

  • With the inclusion of a new paragraph 2-bis, the application of the penalty has been extended to the directors of companies with shares traded on MTF that operate in violation of Article 132;

(ii) Amendments to Article 184 (Criminal sanctions relating to the abuse of privileged information):

  • The provision of paragraph 1, letter b) – referring to the tipping conduct – has been integrated to also include a reference to the market sounding;

(iii) Amendments to Article 185 (Criminal sanctions relating to the manipulation of the market):

  • The main changes in relation to the previous legal framework concern the cases of manipulation of the benchmark and the indicators of operational manipulation as provided in the MAR and the related implementing technical standards;

  • With the amendments under paragraph 2-bis, the infringement therein provided extends, other than to conduct regarding financial instruments traded on MTFs, also to conduct regarding financial instruments traded on OTFs, derivatives and emission allowances;

  • The introduction of the paragraph 2-ter allows the harmonisation of the scope of the criminal and administrative sanctions with the scope provided by Article 2, paragraph 1 of the MAR;

(iv) Amendments to Articles 187-bis and 187-ter (Administrative sanctions relating to the abuse of privileged information and to the manipulation of the market):

  • The sanctions provided in the abovementioned provisions have been amended and now reference directly to the violations to the abuse provisions set by Articles 14 and 15 of the MAR;

(v) Inclusion of new Article 187-ter.1 (Violation of the preventive measures):

  • The provision lays down the sanctions for the violation of the preventive measures. When the breaches are characterised by low offensiveness or dangerousness, the Article provides the possibility to apply, alternatively to the monetary administrative sanction, (i) the order to eliminate the contested infractions or (ii) the public declaration concerning the committed violation and the responsible subject;

(vi) Amendments to Article 187-quinquies (Responsibility of the entity):

  • The amendment allows CONSOB to apply the monetary administrative measure of €20,000 to €15,000,000, or up to 15% of the turnover (when such amount is higher than €15,000,000 and the turnover is identifiable in accordance with Article 195 paragraph 1-bis) in the case where the violation of Articles 14 or 15 of the MAR is done to the relevant entity’s advantage or interest;

(vii) Amendments to Article 187-sexies (Seizure):

  • The application of the administrative monetary measures provided by the relevant section of TUF provides for the seizure of the product and the profit arising from the offence;

(viii) Amendments to Article 187-terdecies (Application and execution of the criminal and administrative sanctions):

  • It is provided that, when an administrative monetary sanction pursuant to Article 187-septies or a criminal sanction or an administrative measure following a criminal offence is imposed against the offender or the infringer or the entity for the same event, the judicial authority or CONSOB takes into account, when imposing the relevant sanctions, the sanctions already imposed; the collection of the monetary sanction, of the pecuniary measure following a criminal offence or the administrative monetary sanction will be limited to the part exceeding the previous collection, respectively, from the administrative or from the judiciary authority.

C. Ne bis in idem

(i) As already mentioned under item B. above, the Decree has amended, inter alia, the existing legislation on applicable administrative sanctions for market abuse and insider trading offences. Among other things, changes have been made to Article 187-terdecies of the TUF on the application and enforcement of criminal and administrative sanctions, adding a new chapter to the longstanding debate over the Italian dual-track system and its compatibility with the double jeopardy (ne bis in idem) principle.

  • Pursuant to the amended version of Article 187-terdecies, CONSOB and the judicial authorities will be required, when imposing sanctions for market abuse or insider trading offences, to take into account any criminal or administrative sanctions already imposed on the same individual or entity in case involving the same facts. By introducing such an amendment, the Italian government has implicitly confirmed the existence of a dual track sanctioning system consisting of administrative sanctions and criminal sanctions for these kinds of offences; indeed, the same individual or entity could potentially be sanctioned twice on the same facts, provided that the sanctions already applied are “taken into account” by the competent authorities imposing the second sanction.

  • Interestingly, the amendment comes into force a few months after the Court of Justice of the European Union (ECJ) issued three decisions on the compatibility of the Italian sanctioning regime with EU legislation on double jeopardy (ne bis in idem).

  • With these decisions the ECJ had expressly excluded the possibility of someone being sanctioned twice for the same conduct where the first sanction is considered adequate, proportionate and capable of addressing the violation concerned. In other words, the Court concluded that the ne bis in idem principle may indeed be limited, though on an exceptional basis and solely for the purpose of protecting the financial interests of the EU and the financial markets thereof.

At first glance, the reform of Article 187-terdecies seems to comply with the principles set out by the ECJ in its decisions. Indeed, the provision will reasonably be interpreted as to require CONSOB and criminal law judges to apply the standards set down by the Court and to take into account the adequacy and proportionality of the sanctions already imposed. However, the reform does not contain any detail on how in practice the authorities should take into account the sanctions already imposed. This lack of guidance could represent an obstacle, for instance where criminal judges are required to assess the suitability of imprisonment for individuals already sanctioned with administrative monetary penalties, given the substantial differences between these two types of sanctions.

Entry into force

The Decree was published on Italian Official Gazette no. 214 of 14 September 2018 and entered into force on 29 September 2018.