Insider Trading Here And Around the Globe

A key focus of the SEC in recently is insider trading – a fact evidenced by even a quick review of the cases the agency has been filing in the past few months. The SEC, however, is not the only regulator focused on insider trading. A look around the globe suggests that regulators everywhere are struggling with the problem.

? This month, the Ontario Securities Commission began its latest insider trading prosecution. Barry Landen, formerly an executive of Agnico-Eagle, is accused of trading in advance of the release by his company of poor financial results. According to the Commission, Mr. Landen avoided a loss of about $100,000.

? In Trinidad, the government is moving forward with legislation to increase the penalties for insider trading to as much as TT$2 million or US$321,151. Under proposed legislation, corporate traders found guilty will be punished with a minimum fine equal to the profit made or the loss avoided and a maximum fine equal to the greater of double the profit made or loss avoided and a term of imprisonment up to six years. The head of the Securities and Exchange Commission Osborne Nurse noted that existing legislation in the area needs to be amended because it implies that certain kinds of insider trading are lawful.

? In Ireland, regulators are struggling with a difficulty that the U.S. SEC solved a few years back – trading in possession vs. using inside information. The Fyffes case has raised this issue. There, the Irish High Court concluded that Mr. Fyffes was not guilty of insider trading because, while he possessed inside information, he did not use it in the trading. This conclusion appears to be based on the 1990 Companies Act which prohibits taking advantage of inside information.

? In Islamabad, Pakistan the Securities and Exchange Commission has enhanced the penalty for insider trading. The new Securities Act also gives the Commission greatly enhanced powers. For example, under the Act, an authorized person may forcibly enter the premise of a licensed person to review and inspect records. The Act also contains new provisions regarding insider trading and market manipulation.

? In Japan, the Japan Securities Dealers is setting up a data base that covers the employees and executives of brokerage houses as part of a crack down on insider trading. This data base will be in addition to one covering executives of listed companies which is due to be completed next May. The data bases will permit the association to closely monitor trading by registered persons and executives.

? In Australia, survey of business executives has concluded that the securities regulator there focuses on easy targets. Likewise, many executives surveyed suggested that the market regulator had the wrong priorities. As a result the survey notes there is a lack of confidence in the integrity of he markets.

This brief survey clearly suggests that the U.S. SEC is not alone in its concerns about insider trading. At the same time, the surveys in Australia suggest that a good “cop on the beat” is essential to healthy markets.