Crime and punishment

6 February 2004

Well up to a point. The new postParmalat draft law strengthens penalties. But the Italian legal system has difficulties securing definitive convictions. So the harsher penalties may not be a big deterrent.

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The Italian cabinet has approved a new draft law to protect investors, following the Parmalat scandal. It creates a new crime and increasing sanctions for existing financial offences. The changes include:

 The new crime – nocumento al risparmio, or harming savers. Under the new law, anyone who causes financial harm to over 0.1% of the Italian population, or defrauds money equivalent to over 0.1% of GDP, risks going to jail for between 3 and 12 years. The sanctions are aggravated if the crime is committed by board members, executives or auditors.

 A doubling of the jail sentences and a tripling of the fines for the crimes contained in the laws that regulate banks, pension funds and financial intermediaries. For example, auditors who give a misleading picture of the state of companies they audit risk a maximum of 10 year in jail instead of 5. For market manipulation, the maximum jail sentence is doubled to 6 years, and the maximum fine tripled to E30,000

 Mandating the government to adopt the EU directive on market abuse within 6 months of the draft becoming law. That would increase Consob's investigative powers, allowing the stockmarket regulator to interrogate anyone, raid offices with the aid of Italy's financial police, inspect telephone and email traffic data and freeze assets. Consob would also be able to impose fines for insider trading and marketrigging ranging from E20,000 to E3m.

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