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Conclusion of UK Government Consultation on Criminal Sanctions for REMIT breaches

Last week the UK government published the conclusions of its consultation (here) on the introduction of criminal sanctions for breaches of REMIT. The draft consultation has now been laid before parliament and will probably enter into force in April 2015, for both the GB and Northern Ireland markets.

Some points to note:

  • The criminal sanctions will only apply to breaches or Articles 3 and 5, i.e. Inside Information and Market Abuse. There is no proposal to apply criminal sanctions for the other sections, such as reporting, which was deemed disproportionate.
  • The criminal sanctions will apply where there is a connection to the UK. This could be the data/trade itself being about one of the UK markets, or the transgressor being under UK jurisdiction. See page 9 for moreĀ details.
  • For criminal sanctions to apply, the person needs to have acted “intentionally or recklessly”.
  • The sanctions apply to “legal persons” which can include actual people or companies.
  • None of the respondents could give actual historical examples of abuse.
  • None of the respondents felt that upgrading the sanctions to criminal would result in procedural changes.
  • Only two of the 14 respondents felt that this upgrade would increase confidence in the market.
  • Most respondents agreed that REMIT should be closely aligned with financial markets regulation, and the government intends to adopt this approach over time.
  • There will be no specific offences related to benchmarks.

This news will hopefully give further “teeth” to REMIT. While the focus for many over the next few months will be reporting, the actual intent of REMIT should not be forgotten. It is important for all market participants to be aware of the rules, train their staff and monitor accordingly.

Also note that there is currently a consultation in progress being run by Ofgem (here) on their proposed procedures on how they will monitor the markets and take action if appropriate.

About avivhandler

Aviv is the Managing Director of ETR Advisory, a niche consultancy focused on the regulation of the commodity, energy and financial markets. He has more than 23 years of experience in the financial, energy and commodity markets, covering regulatory compliance, credit, risk and financial technology. Prior to founding ETR, he was Partner at SunGard Global Services, where he built a Centre of Excellence in European Energy and Commodity Regulation. Before that, he founded Coherence, a consulting firm specializing in credit risk in commodity and energy trading as well as software product management. The credit practice ultimately became part of Sirius Solutions, where he was the Managing Director of Europe. He has also held management roles at KWI and Iris Financial, among other organizations. Mr. Handler holds a degree in computer science from Imperial College, University of London.


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