The penalties system as described above will be affected by the ongoing reforms undertaken by the European Union in the after- math of the financial crisis.
On the one hand, governments and international institutions have responded to the crisis by taking measures of immediate effect, at least to limit the systemic negative effects it generated; on the other hand, the financial crisis has provided a decisive driver for longer-term
reflections on the architecture of the controls and the validity of the regulation system of financial markets. This collective reflection has led among other things to review also the sanctions policy in the EU.48
Starting from a Commission Communication of 8 December 2010 (Reinforcing sanctioning regimes in the financial sector
(( rr), a new atten-
tion to the issue emerged and led to the introduction, in Directive 2013/36/EU of 26 June 2013, of specific provisions on sanctions and a major reform of the sanctioning system.
The provisions on sanctions are not a part of the legislative policy needed to implement Basel III, which consists in the adoption of a integrated legislative package composed by Directive 2013/36/EC and Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013 (known as CRD IV package), so that the rules are directly applicable to institutions’ European credit, in order to ensure a high degree of homogeneity within the legal systems of EU credit institution.
The intervention in the field of sanctions is an important inno- vation, which is justified by the excessive differences found in the investigative and sanctioning powers of the supervisory authorities within the European Union and the aims to harmonize its regula- tory environments, enhancing the overall system of sanctions (35th recital et seq. Directive). To this extent, Title VII of Directive 2013/3649 contains a few administrative sanctions as a common minimum level, in case of material violations of the rules (Arts 65 et seq.), ranging from fines to withdraw the authorization to business.50 The penal- ties must be published (Art. 68), in order to provide them with a strong deterring effect. It also provides for the strengthening of inves- tigative powers of the supervisory authorities, as well as appropriate mechanisms to facilitate reporting by employees of the banks about violations committed within them (whistleblowing). A significant feature, which all the proposals for a directive on financial matters are accepting, is the transition to a system designed to penalize the institution first and only on the basis of conditions to be defined by national law and to the members of the management body or the natural person responsible for the violation (Art. 65, para. 2).
In order to transpose the Directive 2013/36 in the Italian legal system, a delegation to the government is needed and the powers have been granted with the so-called Law of the European Delegation
2013 – Second Semester. Text of the bill which was presented on 22 November 2013 and was approved by the Chamber of Deputies on 10 June 2014 and by the Senate on 17 September 2014. The law of Art. 3 indicates the principles and criteria for implementation of the CRD IV.
The delegation contained in Art. 3 of the delegation law is broader than the European rules. To ensure consistency to the system of sanc- tions on financial matters and to ensure that the same entities or homogeneous violations could be subject to different procedures and regimes depending on the authority having jurisdiction in imposing the sanction (specifically the Bank of Italy and the Consob) it was considered appropriate – with reference to sanctions – to grant the government the power to review organically, according to the criteria set by the CRD IV, not only the administrative sanctions (and the sanctioning procedure), of the CBA, but also those provided by the CFA, for violations of the rules on intermediaries and markets (letters i) and l, no. 1 of Subsection 1, Art. 3 of the bill. 51
Over the next two years, the Italian government will have to review the rules on sanctions provided for in Art. 144 of the CBA,52 regarding the application of sanctions to companies or entities in respect of which the violations are detected and then identifying the assumptions that lead to a liability of the parties involved (that perform administrative, management or control, employees and those who have a different relationship from the employment rela- tionship) (letter i), Section 1.1. A clarification has been added to the original draft law during the parliamentary debate: the application of sanctions shall take into account the size of the companies or entities.
The amount of the fines applicable to companies or entities ranges between a minimum of 30,000 and a maximum of 10 per cent of the turnover, while the penalty applicable to individuals is between a minimum of 5,000 (the amount was reduced in the course of the debate from the original 10,000) and a maximum of 5 million. In any case, it is possible to increase the fines up to twice the amount of the benefit obtained through the violation, provided that this amount can be determined (letter i), Section 1.2.
The government is also delegated to extend the rules on sanctions to all violations under Art. 144 CBA while, as to transparency matters, considering the materiality of the violation (letter i), item 2.
The rules in Arts 133 on the abuse of name, 139 and 140 on the authorization and reporting obligations regarding participation in banks and companies belonging to a banking group, as well as finan- cial parent companies and financial intermediaries (letter i), item 3 should be reviewed by the government in accordance with the prin- ciples and criteria outlined above.
For the other cases relating to the illegal activity of bankers and security intermediary (i.e. activity performed without authorization) as indicated in Art. 130, 131, 131-bis, 131-ter and 132, the delega-r tion law provides that the crimes will remain as such, exercising the option provided for in directive not to introduce administrative sanc- tions (letter i), para. 4.
Also, with reference to the discipline of fines envisaged by the CFA, the government is delegated to follow the principles mentioned above in relation to Art. 144 CBA, with regard to the fines provided for in respect of abuse of name, communication on shareholders and discipline of intermediaries, markets and clearing houses (Arts 188, 189 and 190) (letter l), point 1.
The delegation law provides that the government must consider whether to extend the principle of favor rei53 to the cases of amend- ment of the regulations in force at the time when the violation it was committed. As noted above, the Italian doctrine has already raised the problem and now the lawmakers are called upon to decide the issue with a view to streamlining the procedure. If the system prevents supervisors to enforce in relation to behaviours no longer considered as unlawful the effect is an objective deflation the number of judicial cases.
The government should also set out the criteria54 which the Bank of Italy and the Consob must follow in determining the amount of the fine (even departing from the provisions of Law 689/1981) and should also determine how to publish the acts imposing fines, as well as the arrangements for the exchange of information with the European Banking Authority). The government should grant to the Bank of Italy and the Consob the power to define the implementing provisions, including with regard to (i) the concept of “turnover”, which is relevant in the determination of the fine and the sanction procedure. During the parliamentary debate, it was clarified that all regulatory measures, also in the nature of secondary legislation for the implementation or execution, shall be adopted within the scope of the specifications provided for by Directive 2013/36/EU.
In a view to improve the efficiency of the penalty proceedings, the government is delegated to set forth – with reference to the cases characterized by a low offensiveness or risk – tools to deflate litiga- tion or simplify the procedures for application of the sanction; in this context, the option to exclude the application of fines for behav- iours without real danger or offensiveness is left to the supervisory authority (letter m), para. 5.
Finally, the delegation law provides for a broadening of the meas- ures to be adopted by the regulatory authorities to which the govern- ment may assign the power to adopt measures relating to public reprimand, order to cease or remedy irregular conduct, the temporary suspension from office (letter n); until the withdrawal of the authori- zation to perform the activities of intermediaries (letter o) by making proper connections with the discipline of crises management.
Innovations are of such magnitude that para. 1 of Art. 3 closes with a provision allowing the government to amend the current legislation with all modifications and additions necessary to ensure coordination between the existing rules and any future regulations (letter q).
Although the first scholarly reflections on the impact that the reform will have of the European regulatory framework harmo- nizing national rules on administrative sanctions on the Italian legal system are oriented in thinking that the required adjustments will be minimal, in effect the innovative potential offered by the law enabling the government to transpose the CRD IV in the field of sanctions seem of a radically different level and deserves to be care- fully followed in its implementation.
Notes
1. Even before being a guarantee that the legal system is effective, sanctions are the main criterion of the rules being juridical. See N. Bobbio, Sanzione , Noviss. Dig. it. , Vol. XVI (Torino: Utet), 1969.
2. In the last few years, the Italian law system, due to Cirio and Parmalat scandals, saw an exponential growth of the enforcement powers granted to the financial markets watchdogs as well as an evident tightening of the applicable sanctions, mostly through the enactment of Law No. 262 of 28 December 2005, “Rules to protect savings and discipline the financial markets”. The law is the offspring of the emotional wave surrounding noto- rious scandals (namely Cirio and Parmalat cases), and it is a multifaceted
reform: in general, see F. Capriglione, La nuova legge sul risparmio (Padova:
Cedam), 2006 and, ivi, for an analysis of the new criminal rules, see M.
Sepe, La nuova disciplina dei reati societari e finanziari, for the new profiles of the administrative sanctions, see E. Bani, Le sanzioni amministrative ; on the tormented story which led to the enactment of the current law, see L.
Spaventa, “Note su una creatura non nata: il disegno di legge sulla tutela del risparmio ”, (2005) Merc. conc. regg ., 2, pp. 425–443.
3 . High-level Group on Financial Supervision in the European Union, chaired by Jacques de Larosière, 25 February 2009, particularly § 201, p. 50.
4 . M. Fratini, Le sanzioni delle autorità amministrative indipendenti (Padova:
Cedam), 2011; M. Trimarchi, “Funzione di regolazione e potere sanziona- torio of Autorità indipendenti”, in M. Allena e S. Cimini, “Il potere sanzi- onatorio delle Autorità amministrative indipendenti ”, (2013) 26 Dir. ec. , no. 82 (extra content only online), p. 85.
5. M. Clarich, Autorità indipendenti. Bilancio e prospettive di un modello (Bologna:
Il Mulino), 2005, 88 ss.
6. Art. 113 CFA, para. 3, delegates to the Consob the task to identify in a regu- lation cases and conditions which may allow the issuers to postpone the diffusion to the public of privileged information; Art. 193 CFA states that the Consob will fine the violation of Art. 113 CFA or the regulation created to implement it; see W. Troise Mangoni, Il potere sanzionatorio della Consob, (Milano: Giuffrè), 2012, 91 ss.
7. Ivass (the authority that replaced Isvap as provided for by Decree Law No.
95 of 6 July 2012, converted by Law No. 135 of 7 August 2012) on the grounds of the delegation contained in the Insurance Code, adopts general provisions regarding, inter alia, (a) the fairness of advertizing, the rules of introduction and conduct of insurers and intermediaries when offering insurance products, (b) information duties before entering into the agree- ment and during its performance, (c) the control of adequacy of the proce- dure for the management of risk, (d) capital adequacy (Art. 191 Insurance Code). Art. 310 of the Insurance Code, inter alia, empowers Ivass to sanc- tion the violations of these regulations.
8. The Court of Cassation, which traditionally preferred a non-authorita- tive vision of the sanctioning function, emphasized the particular link between the sanctioning function with the supervision when upheld the Isvap (and AGCM) sanctions being authoritative, exactly because of this link (see Cass., Un. Section, no. 24816, no. 24817, and no. 24818 of 29 November 2007; Cass., Un. Section, no. 23667 of 9 November 2009; Cass., Un. Section, no. 8882 of 29 April 2005).
9. The Bank of Italy Supervising Regulations of December 2012 as to the administrative sanctions (see paragraph 5) clarify that, when dealing with general rules, the offending behaviour must be defined taking into account specific measures, if any. The regulations promote an active cooperation as well as the adoption of remedial measures by the supervised entities to foster the exercise of the sanctioning power in pursuing the finalities of the supervision.
10. On the sanctioning power of the independent authorities as an enforce- ment tool of the regulation, see E. Bani, Il potere sanzionatorio delle Autorità indipendenti (Torino: Giappichelli), 2000, p. 40. One of the elements which can support the thesis that the sanctions issued by the independent authorities are expedient to the regulation is the discretion allowed to the independent authorities in determining the amount (see E. Bani (2000), p. 45). Trimarchi, “Funzione di regolazione e potere sanzionatorio delle Autorità indipendenti” (above) doubts and stresses the point that the argument is based “on the disputed distinction between administra- tive discretion, which is assumed to exist in the sanctions issued by the independent authorities, and the judicial discretion, which is assumed to exist – by analogy with the alla punishment – in the sanctions governed by Law 689/1981”. The antitrust area shows the sanctioning model in which the punishing aspect receded most in favour of the regulatory one. The leniency programs of the antitrust law definitely evoke a use of the sanc- tion power as incentive tool and the program constitutes the epiphany of a system which does not set as its main mission that of inflicting a punishment to the wrongdoer. In these cases, the interest in the correct performance of the regulated activities and in respecting the fundamental principles of the sector runs parallel – during the development of the procedure – to the interest in identifying and punish the wrongdoers and sometimes the former prevails over the latter.
11. See Directive 2013/36 insisting on the penalty to be dissuasive (whereas no. 36 and no. 38).
12. F. Capriglione, Intervento pubblico e ordinamento of credito (Milano: Giuffrè), 1978.
13. In the financial sectors governed by authorities, the attribution were allocated to a technical body, entrusted to perform the inquiry and to a political one (then the Ministry of Treasury, balance and economic plan- ning) who had to issue the judgement. In the old system, the authority notified the charges and evaluated the defences submitted by the wrong- doers. After the inquiry, the authority made a proposal suggesting not to proceed or to adopt a measure. The issuance of the final measure was an activity of the Minister of Treasury, through a motivated decree subse- quently published in the authority bulletin.
14. M. Allena, “La potestà sanzionatoria delle Autorità indipendenti come luogo di emersione di nuove sistemazioni concettuali e di più elevati canoni di tutela dettati dal diritto sovranazionale europeo”, p. 17.
15. M. Allena, “La potestà sanzionatoria delle Autorità indipendenti come luogo di emersione di nuove sistemazioni concettuali e di più elevati canoni di tutela dettati dal diritto sovranazionale europeo” stresses that the various regula- tions issued by each authority to set the procedural rules in the sanc- tions matter actually do not comply with the principles upheld by the Strasbourg judges interpreting Art. 6 ECHR, on a number of issues. The first is the effective distinction between the inquiry function and the judgement activity, then there is the failure in creating a full adversarial
situation and a weakness in ensuring a full right of defence to the accused person. For instance, with the notable exception of the sanctioning procedure of the antitrust authority (Autorità garante della concorrenza e del mercato), the accused person has neither the right to be listened at a hearing nor the right to directly debate with the body issuing the measure, which will decide only on the grounds of the reports and proposals filed by the inquiring office.
16. M.S. Giannini, Osservazioni sulla disciplina delle funzione creditizia, in Scritti giuridici in onore di Santi Romano (Padova: Cedam), 1940, II, 714 ss. The theory of the credit sector as a sectional system stems from Santi Romano central theory of the coexistence of various legal frameworks at the same time and in the same Nation State. The defining elements of a sectional system were (i) the creation by virtue of law of a cluster of subjects, (ii) the organisation and (iii) the power to create rules. The idea of the credit sector as a sectional system under the 1936 Banking Act, induced some scholars to consider the fines indicated by the Banking Act as disciplinary sanctions. As a practical consequence when Law 689/81 was enacted, its general rules would not have been applicable to the “banking” sanctions, as by virtue of Art. 12 of Law 689/81 the law does not encompass the disci- plinary sanctions. Prevailing opinions excluded the idea of construing the supervisor – supervised relationship in hierarchic terms: see, for all, M.
Condemi, Le sanzioni amministrative bancarie e la giurisprudenza della Corte di Appello di Roma, Quaderni di ricerca giuridica della Consulenza legale della Banca d’Italia (Roma), 1991, p. 17.
17. E. Bani, Il potere sanzionatorio delle Autorità indipendenti , p. 40; C.E. Paliero,
“La sanzione amministrativa come moderno strumento di lotta alla criminalità economica” (1993), Riv. Trim. Dir. Pen. Econ. , p. 1040; S. Ceci Iapichino, Le sanzioni amministrative , in E. Galanti, ed., Diritto delle banche e degli intermediari finanziari (Padova: Cedam), 2008, p. 1428.
18. P. De Biasi, Persuasione e castigo. Le sanzioni amministrative nel TUB e nel TUF (Milano: Giuffrè), 2003, p. 4.F
19. The procedure to impose a fine takes time due to the necessity to respect the adversarial principle and to allow to the supervised entity the possi- bility to organize a defence. The presumption of guilt, typical of the administrative sanctions and the simplified procedure, cause the admin- istrative process to be undoubtedly shorter than the criminal one.
20. A. Baldassarre, Le sanzioni delle Banca d’Italia , in M. Fratini, (ed.), Le sanzioni delle autorità amministrative indipendenti (Padova: Cedam), 2011, p. 471. The rules which breach causes the issuing of a measure imposing a fine are contained mainly in Art.144, but also in Arts 133, 139 and 140 CBA. The articles deal respectively, with unauthorized use of names, violation of rules on authorization to business or notification require- ments for major bank holdings or CBA rules on banking activity, require- ments of the corporate officers and relationships with the Bank of Italy.
Illicit acts listed in Art. 144 CBA include (i) unauthorized credit activity performed by co-op banks in favour of non-shareholders, (ii) violation
of the transparency rules in the premises on interest rates and fees to customers or any other economic terms or conditions (iii) the violation related to the issuance of bankers’ cheques.
21 . S. Ceci Iapichino, Le sanzioni amministrative, in P. Ferro Luzzi and G.
Castaldi, (eds.), La nuova legge bancaria (Milano: Giuffrè), 1996, p. 2016.
22 . In particular, Law 262/2005 increased fivefold the original amounts of the fines.
23 . M. Condemi, Commento all’Art. 144 in F. Capriglione, (ed.), Commentario al testo unico delle leggi in materia bancaria e creditizia (Padova: Cedam), 2012, p. 2383.
24 . The strict liability rule emerged only recently in the banking sector: in case agents or intermediators of credit commit any of the illicit acts listed in paragraphs 6 and 7 of Art. 144 CBA, the “legal representative of the company” is prosecuted. When it comes to pension funds, the criterion is still the personal liability.
25 . E. Casetta, Sanzioni amministrative, in Dig. disc. pubbl. (1997). The general principle of the option offered to the wrongdoers to pay a reduced fine provided the subject waives the right to challenge the measure do not apply. Also, the general rules on the recourse of the institution, jointly liable with the wrongdoer for the payment of the fine do not apply. The mandatory recourse of the entity – jointly liable – against the wrongdoer, drifting from the general rules of Law 689/81 where the recourse is just an option, underlines the enhanced personal liability the wrongdoer and the accountability of the management, which cannot pass to the institu- tion the risk of a fine. On the exceptions to the general rules, particularly the procedural ones, see L. Donato, “Il procedimento sanzionatorio delle Autorità indipendenti e le deroghe rispetto alla disciplina generale”, in M.
Allena and S. Cimini, eds., Il potere sanzionatorio, p. 113.
26. “The principle of the preserve of law set for the administrative sanctions by Art. 1 of the law no. 689 of 24 November 1981 no. 689, forbids that the illicit act and the consequent sanction can be created directly by second level sources of law. The rule does not prohibit, however, that the precepts of a law, clearly defined, can be supplemented by regulations, in case the second level sources of law will be used in a particularly technical envi- ronment”; see, ex multis, RAT Lazio, Roma, Section II, no. 10620 of 19 December 2012.
27. G. Pagliari, Profili teorici delle sanzione amministrativa (Padova: Cedam), 1988; C.E.Paliero and A. Travi, Sanzioni amministrative (voce), in Enc.
dir., XVI, (Milano: Giuffrè), 1989. Contrarian M.A. Sandulli, Le sanzioni amministrative pecuniarie. Principi sostanziali e procedimentali (Napoli:
Jovene), 1983, but the position is basically a minority one.
28 . The precedents share the same view: see for instance Cass., Un. Section, no. 15120 of 17 June 2013; Cons. Stato, Section VI, no. 5746 of 14 November 2012; Cass., Un. Section, no. 14374 of 10 August 2012; Cass., Un. Section, no. 5756 of 12 April 2012; RAT Lazio, Roma, Section III, no. 2685 of 21 March 2012; RAT Lombardia, Milano, Section IV, no. 963 of 2 April 2010; Cons. Stato, Section VI, no. 3497 of 3 June 2010. The