International Securities and Finance - Essay Example

INSIDER TRADING   Introduction On January 17, the Wall Street Journal posted news of an Ex-Mooretrade Julian Rifat was charged with eight insider-dealing charges that included trading in Volkswagen AG (VOW), Barclays Plc. companies. The trader had used confidential information that he had acquire from the capital firm to make abnormal profits in the market more than other investors in the market had (Suzi , 2014). In line with the Uk Financial Conduct Authority, the trader was summoned to appear before the court to be charged for his crimes.

Rifat acting as a professional intermediary used insider information to trade securities of the companies outlined, as they were price affected and thus make high profits than the normal traders (Suzi , 2014). Regulation about securitiesInsider dealing is under the FSA and Securities regulation in the UK. It has been a criminal offense since the year 1985 and currently it is incorporated under the criminal justice Act 1993 Part V. Information that is not available to all parties in the market is deemed asymmetric as traders could use it for their personal gains and make high profits.

Efforts have been done overtime to tighten up laws on insider dealing but still there are some who go unprosecuted. Insider dealing is said to be a criminal offense when; the information on hand is price sensitive to the shares trading in the market and when an individual encourages someone else to pass the inside information or deal with the shares that are price sensitive and finally when the dealing takes place through a professional trader or broker and on a regulated market (out-law.com, 2014).

Own evaluation For most of the times, people have always thought that insider trading is always illegal, but there are some circumstances where it is legal where the officers, employees, directors, buy and sell stock in their own companies and they report to the reporting authorities of their actions. However, it becomes illegal where the buying and selling of securities involves a breach of fiduciary duty or trust and confidence while in possession of material information that is not available to the whole market.

Insider trading is said to undermine investors’ confidence in the market as it does not in any way promote integrity and fairness with some gaining more than others gain. Thus, the relevant authorities should be more stringent in regulating the trading of securities in the market by prosecuting those involved in insider dealings (Mirranda, 2013).The security markets within the UK have faced a lot of criticism from members of the public as issues of insider dealing are still reported daily. The securities regulation together with the courts should increase their watchdogs in insider dealing as some of the cases have taken a very long period to be solved pushing investors away from the stock market as they fear-making losses.

Insider dealings are not good for the economy in any way as they result to raising the cost of capital of the security decreasing the economic growth as they become more expensive to investors in the market. The penalties and fines in insider dealings should also be raised to discourage insider dealings (Kamman & Hood, 2010).ConclusionInsiders trading have become a big issue in the financial markets in the UK. With great adaption of technology in different institutions, this could be a big step to develop programs that can detect insider dealings and thus attract more investors in the purchase and selling of securities driving economic growth.

The main strategy is to build investor confidence in the market and regulatory bodies should see that those involved in insider dealings are fined heavily or spend long time in jail. BibliographyBainbridge, S. M., 2011. Insider trading. Cheltenham, UK: Edward Elgar Pub..Beny, L. N., 2010. The Empirical Evidence on the Regulation of Insider Trading. Annual Review of Law and Social Science, pp. 110-301.Coakley, M., 2011. Tip and trade how two lawyers made millions from insider trading. Toronto: ECW.Fang, H., 2010.

Equity-based compensation and insider trading. Pullman, Wash.: Washington State University.Hirsch, R., 2010. The insider. New York: Berkley Books.Kamman, T. & Hood, R., 2010. Developments in Insider Trading:. The Journal of Trading, pp. 59-67.Mirranda, W., 2013. FSA tightens Securities trading. [Online] Available at: http://www.risk.net/operational-risk-and-regulation/feature/2253142/fsa-toughens-insider-dealing-enforcement/page/1out-law.com, 2014. Insider dealing. [Online] Available at: http://www.out-law.com/page-11115Suzi , R., 2014. Ex-Moore Capital Trader Faces Eight Insider-Dealing Charges.

[Online] Available at: http://www.bloomberg.com/news/2014-01-17/ex-moore-capital-trader-rifat-faces-8-insider-trading-charges.htmlWang, W. K. S. & Steinberg, M. I., 2010. Insider trading. Oxford: Oxford University Press.