The New Insider Dealing Legislation - A Confusing Outcome

Abstract

This paper assess the impact of new insider dealing legislation on companies, brokers' analysts, professional fund managers and private investors. The revised legislation came into effect in April 1994. Our main conclusions are: the new legislation is open to many interpretations. In our view, the probability of successful conviction is negligible. There is already a need for a review of the implication of the legislation, to include an assessment of whether civil, rather than criminal, prosecution may present a more workable solution the new legislation has succeeded in forcing companies to release new information into the marketplace through formal announcements. While this may have resulted in a fairer environment, it may also have damaged the efficiency of the stock market, in the sense that more knowable information is not reflected in share prices. There have been many instances of sharp falls in share prices in response to official announcements. Solutions will need to be found if stock market credibility is to be upheld.