What's wrong with insider dealing?

Abstract

If there is one fact about which critics (deregulators) and proponents (regulators) of anti-insider dealing laws are certain to agree, it is that rules designed to prohibit trading on inside information are popular. Virtually every country with a developed securities market has implemented legislation regulating insider dealing and in the vast majority of cases criminal sanctions have been imposed. Britain is no exception, and has recently reaffirmed its policy commitment in the Criminal Justice Act 1993, Part V (CJA). Regulators claim that legislation is justified on the basis of a range of different arguments, the most consistently cited of which is that insider dealing jeopardises the development of fair and orderly markets and by so doing undermines investor confidence. Other justifications include allegations that insider dealing is immoral, and contrary to ‘good business ethic’; that it hurts corporations (and their shareholders), investors, and market-makers;