JARAF, The Journal of Applied Research in Accounting and Finance

Journal of Applied Research in Accounting and Finance, Vol. 6, No. 2, 2011

8 Pages Posted: 16 Jan 2012 Last revised: 18 Aug 2014

Date Written: January 15, 2012

Abstract

By the end of 2011, global markets continued to bear the weight of negative investor sentiment with concerns over sovereign debt, difficulties in accessing credit and glimpses of slow-downs in key quarters of the global economy. Against this backdrop, corporate earnings are under pressure and share prices and trading volumes in most markets exhibit often erratic and volatile behaviour, a trend that shows little sign of abating in 2012.

While this wave of uncertainty crashes through share prices we are reminded of the cyclical nature of markets, and although unpalatable for investors, such a disturbance is par for the course and is not a signal that markets are failing. Rather it may be an indicator that markets are functioning well and exhibiting fairness and efficiency. But what about integrity?

A volatile and unpredictable market at a time of compression of corporate earnings may be seen as some as providing a fertile environment to mask prohibited trading behaviour such as insider trading and failures of continuous disclosures. A higher incidence of illegal market manipulation activities lower the integrity of a marketplace which in turn creates a greater ripple effect on building negative sentiment, raising the cost of capital and withdrawing much-needed capital from markets.

Despite the difficulties in detecting prohibited trading behaviour, securities regulators place significant stock in attempting to ensure improved market quality and integrity through changes in market design (including regulation, financial instrument design and technology) and through enforcement activities. In this issue of JARAF we examine the legislative provisions and current practices of insider trading and continuous disclosure in the Australian market.

In our first article, Juliette Overland focuses on the laws governing insider trading and the difficulties in applying these laws in practice. Her articles examines the Chinese Wall defence and identifies opportunities for improvements in the legislation.

Next, Josephine Coffey focuses on the laws governing continuous disclosure and examines the complexities in cases where the regulator has attempted civil and criminal legal actions to address breaches.

Finally, Cary Di Lernia and Angelo Aspris provide a base-line study examining regulatory enforcement in Australia, shedding light on the practice of continuous disclosure by listed firms via responses to ASX price queries.

Keywords: financial reporting

JEL Classification: M40, M41

Suggested Citation

Finch, Nigel, JARAF, The Journal of Applied Research in Accounting and Finance (January 15, 2012). Journal of Applied Research in Accounting and Finance, Vol. 6, No. 2, 2011. Available at SSRN: https://ssrn.com/abstract=1985720

Nigel Finch (Contact Author)

Saki Partners ( email )

Australia

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