Friday, March 24, 2006
Insider Trading FSA, SFA
I was deliberating whether to bother even commenting on the FSA's latest 'findings'. Often if you write about something the thing itself is given more credibility merely by the act of commenting on it. I concluded that in the end, there is no chance of giving the FSA any more credibility than it deserves, since it doesn't really have any in the first place. That sounds cruel I know, but I'm sentimental. I still long for the days of the old Securities & Investment Board. They were obviously amateurish, hated telling people off and had no glossy brochures or websites to try and convince you they were serious.
Not so the FSA.Last week the FSA have noticed that insider trading is 'rife' in the city of London. My what a revelation! but not exactly man bites dog is it.If you're an insider dealer, I suspect you can still sleep safelyat night. They are hardly the SEC and there are no Eliot Spitzer types in there. As with all regulators it's a difficult balancing act trying to regulate a market and yet not to overburden it with bureaucracy.Light touch, risk based regulation is the way the FSA wants to go , which seems sensible.This was probably the only useful thing to come out the ineffectual tenure of Howard Davies as the FSA's Chairman. Spookily another ex-Mckinsey alumnus.He thankfully moved on.The thing with insider trading is that although its apparently relatively common, it's very hard to prove. It needs a lot of investigation and man power. The convictions are rare and usually the fines are for very small sums. It may be better to take a more practical approach and abolish the offence altogether for something wider, and less onerous to prove. Maybe just bring it under the heading of market abuse. I don't know it just seems logical and a better use of resources. The second point is the standard defence of all white collar criminals, it's a 'victimless' offence. Yes there are all sorts of arguments that show the consequential 'victims' of the insider trading 'crime', but in one sense it's true.It's about perception rather than reality. The man on the street couldn't care less about who's screwing who in the stock market.He has to continue to get on with his dreary job, pay the mortgage, get the kids to school on time etc.Insider trading is the least of his concerns. In a sense his remoteness from the environment and nature of the 'crime' makes it unlikely whether he gives two hoots about the FSA's research and what they do.
Closer to the public's heart are things like effect on investors of the endowment mis-selling scandals, or the split capital debacle.Does anyone know if these two problems were ever resolved? No one can even be bothered finding out it's been dragging on so long. A bit of compensation here, a letter there.Perhaps the FSA should concentrate on the more mundane stuff and really show the investing public that it can protect the interests of the common man, before taking on the big stuff like insider trading.Compare the FSA's approach handling small investor claims of impropriety to its Amercian counter-part, the SEC, class actions, big payouts.US investors have been compensated for loss of faith and money, even if they haven't had their confidence restored.
Even though it's rife ,I don't think the stock market is going to be being derailed in the short term by insider trading, nor do I see any innovative solutions coming out of the regulator. Maybe that's why it lacks credibility.
RB
Not so the FSA.Last week the FSA have noticed that insider trading is 'rife' in the city of London. My what a revelation! but not exactly man bites dog is it.If you're an insider dealer, I suspect you can still sleep safelyat night. They are hardly the SEC and there are no Eliot Spitzer types in there. As with all regulators it's a difficult balancing act trying to regulate a market and yet not to overburden it with bureaucracy.Light touch, risk based regulation is the way the FSA wants to go , which seems sensible.This was probably the only useful thing to come out the ineffectual tenure of Howard Davies as the FSA's Chairman. Spookily another ex-Mckinsey alumnus.He thankfully moved on.The thing with insider trading is that although its apparently relatively common, it's very hard to prove. It needs a lot of investigation and man power. The convictions are rare and usually the fines are for very small sums. It may be better to take a more practical approach and abolish the offence altogether for something wider, and less onerous to prove. Maybe just bring it under the heading of market abuse. I don't know it just seems logical and a better use of resources. The second point is the standard defence of all white collar criminals, it's a 'victimless' offence. Yes there are all sorts of arguments that show the consequential 'victims' of the insider trading 'crime', but in one sense it's true.It's about perception rather than reality. The man on the street couldn't care less about who's screwing who in the stock market.He has to continue to get on with his dreary job, pay the mortgage, get the kids to school on time etc.Insider trading is the least of his concerns. In a sense his remoteness from the environment and nature of the 'crime' makes it unlikely whether he gives two hoots about the FSA's research and what they do.
Closer to the public's heart are things like effect on investors of the endowment mis-selling scandals, or the split capital debacle.Does anyone know if these two problems were ever resolved? No one can even be bothered finding out it's been dragging on so long. A bit of compensation here, a letter there.Perhaps the FSA should concentrate on the more mundane stuff and really show the investing public that it can protect the interests of the common man, before taking on the big stuff like insider trading.Compare the FSA's approach handling small investor claims of impropriety to its Amercian counter-part, the SEC, class actions, big payouts.US investors have been compensated for loss of faith and money, even if they haven't had their confidence restored.
Even though it's rife ,I don't think the stock market is going to be being derailed in the short term by insider trading, nor do I see any innovative solutions coming out of the regulator. Maybe that's why it lacks credibility.
RB
