THE FRENCH STOCK EXCHANGE
& RELATED FINANCIALMARKETS
How they operate
and how they are regulated

The number of financial offences has undoubtedly grown in France over the last few years. Of these insider dealing is probably the most well known because of the news coverage given to certain cases. Nevertheless, other offences exist in the stock exchange sector and all have the same goal as insider dealing which is to penalise those who alter the normal operation of the market. It should be stressed that the security of a market, because it is the bases for investors' trust in the market, is one of the principal factors contributing to competitiveness between markets. Therefore each state strives to ensure that transactions are fair, notably by legislating, to maintain a certain degree of integrity.

One of the most sensitive issues is that of financial information, because it is a fundamental indicator of market traders' behaviour. Therefore it must be ensured that operators have equal access to information. In France the organisation that surveys information given to investors is the "Commission des Opérations de Bourse" (COB) who fulfil this role through powers of both control and sanction.

The laws on the dissemination of false information and price rigging help to ensure that the market operates smoothly by repressing actions whose aim is to modify listed prices by changing them artificially, either by diffusing false or misleading information, or by manoeuvres (for example by directly intervening on the market). From the study of these two infractions it can be seen that they are very closely linked to each other which makes certain people argue that the two infractions should be dealt with in a single text. However French legislation attempts to distinguish them and there is often a degree of confusion between the two.

These offences are dealt with by ruling no. 67-833 of 28.09.1996 and by a COB regulation (since the Law of 02.08.1989 the COB has its own sanctioning powers), thereby covering both penal and administrative law. From these texts it results that, for both the dissemination of false information and for price rigging, the ruling and the regulation do not define the offence in the same way, therefore the offence has to be distinguished from failure (practices opposite to provisions in COB regulations). Finally, concrete examples of COB decisions and case-law from judicature help to clarify the two notions.

I - False or misleading market information

A - Dissemination of false or misleading information

1 - The statutory law: article 10-1 paragraph 3 of ruling no. 67-833

2 - Factors constituting the offence

- The facts of the case (making disputable information public - information that might alter listing prices - the false or misleading characteristic of disseminated information)

- The moral factor

3 - Penalising the offence of false information

B - Neglecting to inform the public correctly

1 - The statutory text on the obligation of good public information: the COB regulation no. 90-02

2 - Factors constituting failure

- The facts of the case (the generating fact: dissemination or lack of dissemination of information - the type of information)

- The moral factor

3 - Penalising the failure to give the public good information

C - From the offence of false information to insider dealings

A - The offence

1 - The statutory text: article 10-3 of ruling no. 67-833

2 - Factors constituting the offence

- The facts of the case (illegal practices or attempting illegal practices - the aim of the illegal practice - forced rapid price increases)

- The moral factor

3 - Penalising price rigging

B - Failure to meet the COB regulation pertaining to price fixing

1 - The text of regulation no. 90-04

- The convention of free confrontation between buying and selling orders

- Limits defined in articles 3 and 4 of the regulation

2 - Factors constituting failure

- The requirement of direct market intervention

- The absence of moral factors

3 - Penalising the failure to meet regulation COB no. 90-04

C - Operations to maintain or stabilise prices in relation to the offence of price rigging

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