Insider Trading Enforcement Overseas

Insider trading is a key focal point not only of the SEC’s enforcement efforts but also of regulators around the world. Consider, the following examples:

Bulgaria: The Financial Supervision Commission reportedly fined twelve persons for trading on inside information. The traders allegedly traded in the shares of Elektronika AD and Sofia Mel Ad based on inside information. One of the traders was the son of the managing director of the investment banking firm for Elektronika AD. The others were members of the board of directors. The trading took place on the Bulgarian Stock Exchange.

Peoples Republic of China: According to the head of the China Regulatory Commission, insider trading has become more sophisticated and difficult to detect. In addition, front-running by managers of government-run mutual funds is apparently rampant. This stems from several factors. Managers are poorly paid, while profits from front running are huge. At the same time, the CRC is small and under funded, while class actions are not permitted and private suits must follow the lead of the regulator.

Shanghai, China: The Central Commission for Discipline Inspection warned Party officials to refrain from engaging in insider trading in the country’s stock market. While insider trading is illegal, reportedly there are significant price increases in advance of any major announcement that may be price sensitive.

India: Although the country has had prohibitions against insider trading since 1947, it recently amended the laws to plug loopholes revealed during an insider trading case in 2002. The amendments are similar to those of Exchange Act Section 16(b), and focus on disclosures by those holding 5% or more of the voting securities of an issuer, by directors or officers of their transactions and of short swing profits. In addition, market regulator SEBI recently banned a former managing director of a large company from engaging in market transactions for five years based on insider trading claims.

Japan: A former company president was recently sentenced to 18 months in prison and suspended for three years from stock trading for insider trading. In addition, three employees of public broadcaster NHK in Tokyo are reportedly under investigation by the Securities and Exchange Surveillance Commission for insider trading.

Clearly, insider trading enforcement is more than a U.S. concern.