Going Dutch: Catch‐all insider trading
| Date | 01 April 1999 |
| Pages | 331-338 |
| Published date | 01 April 1999 |
| DOI | https://doi.org/10.1108/eb025020 |
| Author | Marc Groenhuijsen,François Kristen |
| Subject Matter | Accounting & finance |
Journal of Financial Regulation and Compliance Volume 7 Number 4
Going Dutch: Catch-all insider trading
Marc Groenhuijsen and Francois Kristen
Received: 23rd August, 1999
Tilburg University, PO Box 90153, 5000 LE Tilburg, The Netherlands;
tel:
+31 13 466 8374; fax: +31 13 4668102
Marc Groenhuijsen is a professor in crim-
inal law and criminal procedure at Tilburg
University and Francois Kristen is a PhD-
fellow at the Center for Company Law at
Tilburg University.
ABSTRACT
In the Netherlands new legislation has come
into
force in order to deal with insider trading.
The
legislator
followed a new strategy. This
time, instead of a provision with well-defined
criteria, a sort of
catch-all
provision was cre-
ated.
The aim was to avoid
difficulties
in prov-
ing the offence. As a consequence, a new
problem has arisen — usual and
accepted
beha-
viour on the stock markets, such as exercising,
a green shoe option, is now within the ambit of
the penalisation. The Dutch legislator has thus
created some exceptions. These developments
arc analysed in the paper.
INTRODUCTION
In the Netherlands, insider trading has been
a criminal offence since 1989. According to
the initial explanatory memorandum the
objective of the statutory prohibition was
to protect confidence in the financial mar-
kets.
Insider trading is commonly
regarded as a breach of trust. The insider
uses price-sensitive information, ie infor-
mation which has not yet been effectively
absorbed by the stock market, to engage in
profitable transactions. The insider takes
advantage of this privileged position.
Other investors, of course, feel deceived. A
resulting lack of confidence in the stock
markets could easily have the effect that
investors refrain from further trading on
this market. This may interfere with the
vital role of the stock market in the eco-
nomic process. According to the legislator
the provisions of 1989 have not been effec-
tive enough in protecting public confi-
dence in fair play and equal opportunities
on the stock markets. Hence, new legisla-
tion was enacted recently. The theoretical
framework on which the new law is
founded, has been accentuated. The expla-
natory memorandum repeatedly appeals to
the ground rule of 'disclose or abstain'.
This is pictured as a 'clear rule' from which
it follows that everyone who has inside
information simply must refrain from
transactions. It would probably be better to
refer to this rule as 'abstain until disclosed'.
The other driving force of the legislator is
to establish more conformity to the EC
Directive of 13th November, 1989, on
Coordinating Regulations on Insider Deal-
ing (89/592/EEG) and to the situation in
foreign jurisdictions."
On 1st January, 1999 the new regula-
tions on insider trading came into force.
The new provisions on insider trading are
accompanied by a voluminous set of
detailed rules issued by the Securities Board
of the Netherlands (Stichting Toezicht
EfFectenverkeer (STE), the functional coun-
terpart of the British Financial Services
Authority). These rules contain, among
others, an obligation for directors, desig-
nated officers and private individuals to
Journal of Financial Regulation
and Compliance, Vol. 7, No. 4,
1999.
pp. 331-338
© Henry Stewart Publications,
1353-1983
Page 331
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