Market Manipulation and Insider Trading: the Criminal Risk of the Financial Professional (Arts. 284 and 285 CP)

The financial sector operates under one of the most intense regulatory regimes in the legal order. Traders, portfolio managers, advisers, institution directors, members of investment committees and compliance officers work daily at the edge of rules such as MiFID II, the Market Abuse Regulation (MAR) and, in the field of crypto-assets, MiCA. When conduct crosses the threshold of what is criminally relevant, the professional is exposed to the market-abuse offences, where their own qualification may operate as an aggravating factor. As criminal lawyers specialising in the defence of financial-sector professionals, we explain the two core offences —market manipulation under art. 284 CP and insider trading under art. 285 CP— and how their defence is built.

Market Abuse as a Criminal Category

Under the heading of market abuse the Criminal Code groups the conduct that undermines the integrity and transparency of the financial markets, a legal interest the legislature protects because, without confidence in the free formation of prices, saving and investment suffer. The criminal penalty coexists with a robust administrative regime run by the CNMV, which creates a dual-front scenario, criminal and administrative, that conditions the whole strategy.

The two pillars are market manipulation (art. 284 CP) and insider trading (art. 285 CP). Associated with them, depending on the case, are the falsification of issuer information (art. 282 bis CP), investment fraud (art. 248 CP) and money laundering (art. 301 CP). It is worth delimiting each figure carefully, because the characterisation determines the penalty and the line of defence.

Market Manipulation: Art. 284 CP

Art. 284 CP punishes, in essence, a person who artificially alters the price of a financial instrument. The typical forms are the spreading of false or misleading news or rumours about securities or instruments, the use of violence, threat or deception to alter prices, and the carrying out of transactions that give false signals or secure an abnormal or artificial price (so-called fictitious or apparent-activity transactions).

The penalty provided is imprisonment of six months to six years, a fine of two to five years or of one to three times the gain obtained or the loss avoided, and a special disqualification from operating in the financial market of two to five years. The core of the offence is the artificial nature of the alteration: the defence is often fought on showing that the transaction responded to a legitimate economic rationale and not to a manoeuvre to move the price.

Insider Trading: Art. 285 CP

Art. 285 CP penalises a person who, having relevant and reserved information accessed by reason of their position, profession or activity, uses it to trade in the market or supplies it to a third party to trade. What is punished is taking advantage of an undue informational edge to the detriment of the equality of investors.

The offence does not apply to any transaction: it requires one of the circumstances in paragraph 1 to be present, such as the gain obtained or the loss caused exceeding EUR 500,000, the value of the financial instruments employed exceeding two million euros, or a serious impact on the integrity of the market being caused. Once one of them is verified, the penalty is imprisonment of six months to six years, a fine of two to five years or of one to three times the gain, and a special disqualification of two to five years. The aggravation of art. 285.3 CP, already described, raises the penalty to its upper half for the personnel of the market institutions and of the supervisor.

Secondarily, the Code also addresses financial advice provided without the required authorisation (in the orbit of art. 285 quater CP), a figure that may come into play where investment is raised outside the CNMV authorisation regime.

Related Figures: Falsification, Fraud and Laundering

The financial professional rarely faces a single isolated offence. In practice, the conduct overlaps with other figures that are worth bearing in mind:

• Falsification of issuer information (art. 282 bis CP). It punishes directors who falsify the economic and financial information of the prospectuses or of the public information the company must disclose, in order to attract investors or place instruments. The penalty is imprisonment of one to four years, without prejudice to the aggravations where the funds are obtained or harm is caused.
• Investment fraud (art. 248 CP). Where the raising of capital rests on sufficient deception that causes a detrimental act of disposition. The basic penalty is imprisonment of six months to three years, modulated according to the amount defrauded, and it is aggravated under art. 250 CP where qualifications are present.
• Money laundering (art. 301 CP). The integration into the financial system of funds of unlawful origin is punished with imprisonment of six months to six years and a fine of one to three times the value of the assets, with possible confiscation. It frequently appears as an offence derived from the proceeds of market abuse or fraud.

The Dual Front: Criminal Proceedings and the CNMV File

A single instance of market-abuse conduct can trigger, at once, a criminal investigation and a penalty file of the CNMV or, in laundering matters, action by the Bank of Spain and the SEPBLAC. The interplay between the two planes rests on the principle of ne bis in idem: the same fact may not be punished twice on the same basis.

In practice, the criminal jurisdiction has priority and the administrative procedure is usually stayed pending the outcome of the criminal proceedings. That nuance is crucial, because what is stated or documented in the administrative file may be used in the criminal one, and vice versa. Coordinating the defence on both fronts —avoiding contradictory statements or inadvertent waivers— is an essential part of the strategy.

Financial and Forensic-Accounting Expert Evidence

In these offences, the expert evidence is the piece that decides the outcome. The prosecution must establish the causal link between the conduct and the alteration of the price or the gain obtained, and the quantification of the gain or loss determines which offence and which aggravations apply. The defence therefore works with its own financial and forensic-accounting expert evidence:

• Reconstruction of the pattern of transactions to distinguish normal market movement from the allegedly manipulated one.
• Challenging the correlation between the alleged conduct and the price variation, which often results from external factors.
• Review of the calculation of the gain or loss, a figure that activates or deactivates the aggravations of art. 285.1 CP.
• Analysis of the access to the information and of its genuinely reserved and relevant nature at the time of the transaction.

Lines of Defence for the Financial Professional

The defence in market-abuse offences is technical and multidisciplinary. The lines we examine most frequently are:

1. Non-typicality of the conduct. Showing that the transaction had a legitimate economic rationale and did not seek to alter the price artificially, or that the information used was public or irrelevant.
2. Absence of intent. Market abuse requires knowledge and will; a mistake or a decision based on legitimate market analysis excludes the offence.
3. Discussion of the quantitative threshold. If the gain or loss does not reach the amounts of art. 285.1 CP, the conduct may fall outside the criminal offence and be channelled to the administrative sphere.
4. Challenging the prosecution's expert evidence and providing alternative expert evidence that dismantles the causal correlation.
5. Lawfulness of the evidence. Scrutiny of the obtaining of communications, records and data, whose nullity may drag down the rest of the evidential material.
6. Coordination with the CNMV file and repair of the harm as a mitigating circumstance.

The settled case law of the Supreme Court requires rigorous reasoning both as to the artificial nature of the alteration and as to the effective use of the reserved information; any deficiency in that reasoning opens a ground of challenge that is worth working on from the start of the investigation.