Fragmented Securities Regulation: Neglected Insider Trading in Stand-Alone Banks
53 Pages Posted: 10 Jul 2019 Last revised: 3 Dec 2019
Date Written: December 1, 2019
We examine whether regulatory fragmentation, by separating disclosure venues, negatively affects stock price efficiency and disadvantages retail investors. Stand-alone banks submit filings to bank regulators via FDICconnect rather than to SEC EDGAR. We find that the short-run market reaction to insider-trading filings on FDICconnect is almost non-existent and significantly smaller than for these filings on SEC EDGAR. However, the difference in returns disappear in the long run, suggesting that the short-run difference is not driven by different information content of the filings. We also find that retail investors trade less on insider filings on FDICconnect compared to those on SEC EDGAR. Our findings suggest that regulatory fragmentation undermines market efficiency and disadvantages retail investors by affecting information processing costs.
Keywords: Banks; regulation; fragmentation; insider trading; FDICconnect; SEC EDGAR; filings
JEL Classification: G14, G21, G28, M41, M48
Suggested Citation: Suggested Citation