Financial Market Manipulation and Insider Trading: An International Study of Enforcement Approaches

Abstract

This empirical study applies the authors’ model of enforcement intensity to quantify the severity of sanctions imposed on defendants for market manipulation and insider trading in Australia, Canada (Ontario), Hong Kong, Singapore, and the United Kingdom, providing comparative measures of the relative levels of enforcement intensity in each jurisdiction. The enforcement sanctions studied are custodial sentences, monetary sanctions (both punitive and corrective/restorative) and banning orders. Under the model, the level of enforcement intensity is influenced by both the level of enforcement activity and the severity of the sanctions imposed. The authors find significant differences between the severity of sanctions and levels of enforcement intensity relating to insider trading and market manipulation between the five jurisdictions, which may indicate differences in regulatory enforcement priorities. For example, sanctions for insider trading were more severe than for market manipulation in each of the jurisdictions apart from Singapore. In addition, the stronger enforcement focus in Hong Kong and Singapore is on market manipulation, while in Australia, Ontario and the UK it is on insider trading. The authors’ findings have implications in terms of the ability of the various regulators to create a credible deterrent against insider trading and market manipulation.

Keywords: market manipulation, insider trading, insider dealing, enforcement, securities