The SEC’s Efforts To Deter Insider Trading May Just Shift It Around – ProMarket

The United States Congress requires the Securities and Exchange Commission (SEC) to deter market manipulation, such as insider trading, which it achieves through calibrated remedies for harmful behavior. As the SEC stated in its 2015 annual report regarding insider trading, rigorous enforcement actions send “a strong message of deterrence to would-be violators.” Despite the SEC’s commitment to fair markets and combating illegal opportunistic trading, the public has witnessed numerous high-profile insider trading cases over the decades, which questions the effectiveness of SEC enforcement actions targeting insider trading. In a recent working paper, we provide evidence that SEC enforcement actions do not deter insider trading. Instead, they displace it to other firms within the same industry due to insiders’ expectations that the agency does not have the resources to pursue multiple cases within the same industry within a short period of time.

Source: The SEC’s Efforts To Deter Insider Trading May Just Shift It Around – ProMarket