Broken Windows: SEC Enforcement of Delinquent Insider Filings

48 Pages Posted: 17 Oct 2024

See all articles by Caleb Houston

Caleb Houston

University of Alabama at Birmingham

Brandon N. Cline

Mississippi State University

Valeriya Posylnaya

University of Minnesota - Duluth

Date Written: September 01, 2024

Abstract

The SEC mandates insiders report trading activity by a deadline. Although insiders disregard this requirement 222,613 times from 1988 to 2023, only 0.5% of the violations prompt SEC enforcement action. Comparing enforced to unenforced filing violations we show the SEC pursues insiders who persistently violate the requirement. Evidence also suggests that targeted enforcement has a deterrence on future reporting violations and on other questionable trading practices, such as blackout and stealth trading. We illustrate the deterrence is not limited to the insider experiencing enforcement, and that the strength of the deterrence varies by the insiders' connection to the enforcement action.

Keywords: Enforcement, Security and Exchange Commission (SEC), Insider Trading, Information Asymmetry, Malfeasance, Broken Windows

JEL Classification: G14, G30, G38, K42

Suggested Citation

Houston, Caleb and Cline, Brandon N. and Posylnaya, Valeriya, Broken Windows: SEC Enforcement of Delinquent Insider Filings (September 01, 2024). Available at SSRN: https://ssrn.com/abstract=4954555 or http://dx.doi.org/10.2139/ssrn.4954555

Caleb Houston (Contact Author)

University of Alabama at Birmingham ( email )

Birmingham, AL 35294-4460
United States

Brandon N. Cline

Mississippi State University ( email )

Mississippi State, MS 39762
United States
662.325.7477 (Phone)
662.325.1977 (Fax)

Valeriya Posylnaya

University of Minnesota - Duluth ( email )

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