Insider Trading Under Siege

In 2014, the financial crisis that still affects the world economy and has brought about significant changes in the financial sector. The governmental watch dogs are out in force trying to take steps to find insider trading violations in order to recapture the lost confidence in the banking/investment industry as well as the government’s ability to do its job. 

The United States Securities and Exchange Commission has increased it efforts to curtail suspected insider trading violations. In 2013, the enforcement investigations rose by more than 100 cases and actual prosecutions are on the rise. In the United Kingdom, the Financial Conduct Authority filed insider trading charges in 15 different cases during 2013. Indictments have risen significantly in countries like Hong Kong, Australia and Germany. When convicted, the guilty parties are paying a significant price. Such was the case when Steven Cohen’s now infamous SAC Capital hedge fund reached a $600 million settlement with the SEC. The possibility of prison time is also on the table in most cases.

All things considered, this is really good news for the financial sector. Many experts have long felt that governments around the world have made scapegoats of the financial industry to cover up for weak fiscal policies. Regardless of who’s to blame, the damage in consumer confidence needed to be addressed. As these enforcement agencies go about their business of cleaning up the industry, a brighter light is beginning to shine on banks, hedge funds and investment brokers. These organizations have publicly discussed new internal procedures to guard against suspicious behavior. Also, they are showing greater levels of cooperation with these enforcement agencies. These new safeguards will allow the compliant brokers to do their jobs without looking over their shoulders.

The net result of this increased scrutiny is large gains in consumer confidence in banks and brokerage houses. For several years, bankers and brokers have been guarded about their positions and where they work. These same individuals are holding their heads higher and clients are starting to use their services again. They are regaining that vital component called trust.

The collapse of the financial markets during 2008-2009 is quickly becoming a thing of the past. Lessons have been learned and both the government and financial sector now realize how fragile their relationship is with the world’s consumers. As the world’s economy continues its assent from one of the worse recessions in history, confidence is being reestablished and investors are putting their capital back in the marketplace. It may never be clear who was to blame for the collapse, but if the final outcome is a level playing field for all investors, then perhaps it was an experience worth having in the end.


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