Insider trading and market manipulation are now firmly entrenched in Bermuda's criminal code after legislators agreed yesterday to criminalise the activities.

Amendments to the Criminal Code, approved without objection from the Opposition United Bermuda Party, provide for a $10,000 fine or six months in prison for people summarily convicted of market manipulation, and a $100,000 fine or a prison sentence of up to five years upon indictment.

And those found guilty of insider trading will face even harsher punishment ? a $25,000 fine on summary conviction or two years in prison, and a fine of $175,000 or seven years in prison upon indictment.

While many other countries already have laws against insider trading and market manipulation the offences created yesterday were a first for Bermuda.

The measures deal strictly with criminalisation of insider trading and market manipulation and applies only to regulated investment markets in Bermuda.

Currently the Bermuda Stock Exchange is the only regulated investment market on the Island.

Ms Cox said that a second legislative plank introducing civil penalties would be brought in the future.

Introducing the Criminal Code Amendment Act 2004, Finance Minister said that the measures were in response to issues raised by the IMF review of financial services in Bermuda last year and the UK's Review of Financial Regulation in the Caribbean Overseas Territories and Bermuda.

"This bill is being introduced to keep Bermuda abreast of the fast pace of change in the regulation of financial service centres," Ms Cox said.

"As well it is important for Bermuda to continue to provide effective regulation and to support a market place that meets international standards. With these efforts Bermuda must be ever vigilant as we try to distance ourselves from our competitors and that gap is narrowing quickly."

Market manipulation concerns situations in which "one or more persons engage in conduct intended to distort the market by creating a misleading impression about the supply of, demand for or the price of a particular investment. An example is where a person buys and sells shares deliberately to give the impression that there is a market in those shares," she said.

She defined insider trading as a situation where people with access to "non-public information" likely to affect the value of an investment use that information in trading the investment for their own profit, or passing on it to allow others to do so.

"These types of activities are to be criminalised as they undermine investor confidence in the fairness and integrity of investment markets to the detriment of the general investing public and the companies themselves."

She added that the measures were also important for Bermuda to maintain "internationally recognised investment and market standards" and because the Bermuda Stock Exchange can not oversee the conduct of its members.

And the absence of such laws had put the BSX at a disadvantage internationally, she continued.

"For example, the Financial Services Authority of the United Kingdom has been reluctant to give designated investment exchange status to the BSX in the absence of general legislation dealing with insider trading and market manipulation."

Insiders are defined in the bill as an employee, director or professional working with, or for, a listed company and who has access to non public information about any other listed company.

Ms Cox went on to say that concerns had been raised about the practicality of the bill because Bermuda's small size meant that many people serve on several company boards.

"These concerns are significant but it is important that Bermuda moves forward and takes the first steps to introduce new rules of conduct which will discourage insider trading and market manipulation in order to enhance and strengthen Bermuda's reputation as a well regulated jurisdiction and make our marketplace more attractive." She said some in the financial services sector had suggested that Government introduce civil penalties in tandem with the criminal code amendments, and in keeping with practice in other jurisdictions.

"The Ministry does not disagree with this approach," Ms Cox said.

"However, it would be a major step to put in place immediately a full blown criminal and civil/regulatory regime, with potentially significant resource implications.

She said the Bermuda Monetary Authority would have to handle the non criminal investigations and "taking into consideration the resources needed to properly implement the legislation it is proposed to take a two stag approach and the first phase has to been to introduce criminal offences only."

The Finance Minister explained that because people from outside of Bermuda can manipulate the Bermuda market Bermuda would have to deal with the possible of "cross border insider trading" and that meant that local authorities would have to cooperate with their foreign counterparts.

"Persons overseas can affect our market and we will need to rely on overseas authorities to assist us to preserve the integrity of our market. In return we must be ready to assist them," she said.

"It is a brave new world and we are very much a player in the world scene. With these opportunities come responsibilities and that is what we are dealing with today."