Fragmented Securities Regulation: Neglected Insider Trading in Stand-Alone Banks
51 Pages Posted: 10 Jul 2019 Last revised: 9 Oct 2019
Date Written: October 8, 2019
We examine whether regulatory fragmentation, by separating disclosure venues, affects stock price efficiency. 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. We also find that retail investors trade less on insider filings on FDICconnect compared to those on SEC EDGAR. These results are potentially due to the lower awareness and higher search costs regarding FDICconnect filings. Our results suggest that regulatory fragmentation undermines market efficiency and disadvantages retail investors.
Keywords: Banks; regulation; fragmentation; insider trading; FDICconnect; SEC EDGAR; filings
JEL Classification: G14, G21, G28, M41, M48
Suggested Citation: Suggested Citation