Fragmented Securities Regulation: Neglected Insider Trading in Stand-Alone Banks

53 Pages Posted: 10 Jul 2019 Last revised: 3 Dec 2019

See all articles by Sehwa Kim

Sehwa Kim

Columbia University - Columbia Business School

Seil Kim

Baruch College, City University of New York

Date Written: December 1, 2019

Abstract

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

Kim, Sehwa and Kim, Seil, Fragmented Securities Regulation: Neglected Insider Trading in Stand-Alone Banks (December 1, 2019). Baruch College Zicklin School of Business Research Paper No. 2019-07-01. Available at SSRN: https://ssrn.com/abstract=3416204 or http://dx.doi.org/10.2139/ssrn.3416204

Sehwa Kim (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Seil Kim

Baruch College, City University of New York ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States

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