We invite you to read the column written by our partner, Álvaro Rosenblut, on the main impacts of the Economic Crimes Law on the use of insider information.
Given this new regulatory reality, which includes an expanded list of crimes, increased penalties, and a stricter responsibility framework, it is crucial for companies to implement compliance programs that allow them to identify, mitigate, and prevent the risks they may face.
Before the enactment of the Economic Crimes Law (ECL), the use of insider information was primarily regulated by Title XXI of Law No. 18,045 on Securities Market (LMV). However, with the entry into force of this new legislation, the prohibitions and offenses were strengthened, with the new responsibility statute inherent in this new legal framework, replacing the crimes and sanctions of the LMV with a broader, stricter, and more structured catalog.
With the promulgation of the ECL, conduct related to the securities market became classified as “first-category economic crimes,” which are associated with prison sentences for those responsible, including executives, directors, and those in charge of managing companies that operate in the financial market. Notable crimes include providing false information to the market or the Financial Market Commission (CMF), obstruction of the CMF’s investigative and supervisory powers, market manipulation, fraudulent acquisition of shares without a public offer, unauthorized transactions, and misuse of custodial securities, among others.
Specifically, with respect to insider information generated in the context of the securities market, the ECL classifies both the misuse and unauthorized disclosure of such information as crimes, as well as the recommendation to conduct transactions based on insider information. Furthermore, the responsibility of executives is significantly expanded, as the ECL requires a higher level of control and responsibility, obligating them to ensure that their subordinates are also bound by the duty of confidentiality and to prevent the unlawful use of insider information.
However, the ECL does not only create this new type of offense but also establishes that it is not necessary for the individual committing the offense to have obtained a financial benefit or avoided a loss in order for the crime to be committed. The mere commission of the prohibited act is sufficient.
Finally, the ECL broadens the list of individuals subject to the legal presumption of possessing insider information, including spouses, civil partners, cohabitants, and individuals residing in the same household as directors, managers, administrators, senior executives, and/or liquidators of the issuer or institutional investor.
Given this new regulatory reality, which includes an expanded catalog of crimes, increased penalties, and a stricter responsibility framework, it is crucial for companies to implement compliance programs that allow them to identify, mitigate, and prevent the risks they may face. These programs, if adequately constructed, properly implemented, and updated, will be the primary—and potentially only—defense tool for companies and their executives and directors in the event that one of these crimes is committed within their organizations.
Along with this, the need to continuously improve and strengthen corporate governance policies, with a special focus on risk management, once again takes center stage. Companies that do so will be far better prepared to avoid potential contingencies and will have an effective response in the event of the commission of crimes within the organization.
Column written by:
Álvaro Rosenblut | Partner | arosenblut@az.cl
