Fragmented Securities Regulation and Information-Processing Costs
63 Pages Posted: 10 Jul 2019 Last revised: 29 Nov 2021
Date Written: November 24, 2021
Using a unique setting where stand-alone banks submit filings to bank regulators instead of to the SEC, we examine whether the disclosure system maintained by bank regulators (FDICconnect) generates higher information-processing costs and thus delays market reaction to insider-trading filings. We find that the market reaction to insider-trading filings on FDICconnect is less timely than on those on SEC EDGAR. We also find that only large investors trade more on insider-trading filings on FDICconnect than on those on SEC EDGAR, thus extracting benefits from the delayed market reaction to insider-trading filings on FDICconnect. In contrast to prior studies focusing on the enforcement channel, we identify an information channel through which regulatory fragmentation undermines market efficiency and distorts the level-playing field.
Keywords: Banks; regulation; FDICconnect; SEC EDGAR; insider trading; information processing costs
JEL Classification: G14, G21, G28, M41, M48
Suggested Citation: Suggested Citation