An Empirical Comparison of Insider Trading Enforcement in Canada and the United States

35 Pages Posted: 29 Jun 2018 Last revised: 23 Oct 2018

See all articles by Anita Anand

Anita Anand

University of Toronto - Faculty of Law

Stephen J. Choi

New York University School of Law

Adam C. Pritchard

University of Michigan Law School

Poonam Puri

York University - Osgoode Law School

Date Written: October 19, 2018

Abstract

Canadian and American securities market regulators have differing approaches to enforcement. In this article, we present the results of an empirical study comparing a highly salient aspect of securities enforcement—insider trading—in Canada and the United States. We reach a number of important findings. First, adjusting for trading volume, Canada has a greater intensity of enforcement when compared to the U.S. Second, Canadian securities regulators primarily concern themselves with insider trading in Canadian companies, while the SEC brings more enforcement actions involving insider trading in companies incorporated outside the U.S. Third, we do not find significant differences in the fraction of actions involving multiple traded companies between Canada and the U.S. However, we do see that U.S. investigations involve a significantly greater number of defendants and that the SEC is more than twice as likely to pursue tippers or tippees (although we observe no significant difference in the likelihood that top insiders will be pursued). Fourth, we find that U.S. cases are significantly more likely to result in a criminal referral leading to prosecution. Fifth, we find that settlements are more likely in the U.S. Finally, in terms of monetary penalties, we find no significant difference between the two countries. However, we do find that Canada is more likely to apply a bar as a sanction, but if a bar is applied, the U.S. is more likely to make the bar permanent. These findings neither demonstrate a need for systemic reform in either jurisdiction nor suggest that centralized regulation is necessarily better from an enforcement perspective. But, they do provide insight into the differing points of regulatory emphasis in two jurisdictions. From a comparative perspective, our research thus allows securities regulators to begin to evaluate whether their enforcement approach is optimal on the basis of quantitative data.

Keywords: Insider trading

Suggested Citation

Anand, Anita and Choi, Stephen J. and Pritchard, Adam C. and Puri, Poonam, An Empirical Comparison of Insider Trading Enforcement in Canada and the United States (October 19, 2018). Osgoode Legal Studies Research Paper. Available at SSRN: https://ssrn.com/abstract=3205553 or http://dx.doi.org/10.2139/ssrn.3205553

Anita Anand

University of Toronto - Faculty of Law ( email )

78 Queen's Park
Toronto, Ontario M5S 2C5
Canada
4169464002 (Phone)

Stephen J. Choi

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

Adam C. Pritchard (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-4048 (Phone)
734-647-7349 (Fax)

Poonam Puri

York University - Osgoode Law School ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

HOME PAGE: http://www.osgoode.yorku.ca/faculty/Puri_Poonam.html

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