Preventing Market Abuse – Start With Insider Trading

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Insider trading is the trading of a public company’s stock or other securities (such as bonds or stock options) by individuals with access to nonpublic information about the company. In various countries, some kinds of trading based on insider information is illegal. This is because it’s seen as unfair to other investors who don’t have access to the information, as the investor with insider information could potentially make larger profits than a typical investor could make. 

Trading by specific insiders, such as employees, is commonly permitted as long as it doesn’t rely on material information not in the public domain. Many jurisdictions require that such trading be reported so that the transactions can be monitored. 

Therefore when you want to prevent market abuse start with legal insider trading as that’s where people start to abuse their power of nonpublic information about a company. Therefore instil the necessary help of financial regulators to stamp out market abuse.  

Such as in South Africa there’s the Financial Services Board (FSB). And the Johannesburg Stock Exchange (JSE), as part of its licensing requirements is required to have market surveillance capabilities. And it’s constantly detecting suspicious trading activity.  

The result is that it’s not that rare for matters of insider trading to be investigated and sent to the FSB’s enforcement committee. If it’s warranted, it’s possible that cases of market abuse could be referred for criminal prosecution as they remain criminal offences. 

However, criminal prosecution of any offence is the business of the National Prosecuting Authority (NPA), and not the FSB. Cases could be referred to the NPA, by the FSB through a file, once they’ve done their investigation, for the NPA to prosecute.

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