The prosecution of insider trading: Obstacles to enforcement

Abstract

Insider trading has been criminalised in Australia for over a decade. Yet there have been few prosecutions in respect of such conduct, and none of these have been successful. There is little doubt that insider trading in Australia is extensive and is to be found across many sectors of the securities industry. Despite this, the law has not proved to be an effective vehicle for the social control of insider trading or for the deterrence of such conduct. It seems that the criminal sanctions for insider trading have been largely symbolic in nature. This article explores the obstacles to enforcement of criminal laws in this area by reference to findings from a national empirical study funded by the Criminology Research Council. The study involved in-depth interviews with almost 100 key figures in the Australian securities industry (brokers, lawyers, merchant bankers etc) and of officials involved in its regulation (from the Corporate Affairs Commissions and the Australian Stock Exchange). Problems in detection, proof and punishment, in the nature and extent of regulatory resources devoted to this area and in the content of the law itself are identified and discussed.