When we look back there are a ton of things that have been said to have changed since the financial crisis wafted in like a bad smell into our lives. The bankers have learnt their lessons. The fraudsters that were there to make billions from us, while we were bending over toiling to make ends meet, have changed and now are there to share the money. The government has brought the financial markets under stringent controls. You can wake up since that is what we have been told, but we all know that it’s Wall Street that is pulling the punches and the bankers that are telling us still to toe the line. The latest fabulous myth to have been released with data to back it up is that published today by the Financial Conduct Authority in the UK that is asking us to believe that there is now less insider trading than before the financial crisis occurred. Insider Trading has become a thing of the past, so we are told.
Market Cleanliness in the UK as the Financial Conduct Authority calls it (measuring abnormal share-price changes prior to the public announcement of takeovers) has fallen from 30% of takeovers that took place in2009 to today’s level of just 15.1%. The question should be raised as to why it’s being allowed at all; but that’s another matter entirely. However, the Financial Conduct Authority admits that last year the number increased; although the average increase over the last four years works out to 15.1%. Perhaps a case of ‘let’s release the figures quickly, because the number will be back to its usual level of 30% next year’. Corruption is impossible to avoid, isn’t it? Wasn’t it Aristotle that said that where there’s power there’s the possibility of corrupting someone?
The report states: “The most significant drop in the statistic occurred from 2009 to 2010 while subsequent drops do not differ statistically from the preceding year. The tests therefore suggest that our indicator for market cleanliness decreased in 2010 and remained low thereafter”. Oh! So the drop was only significant between 2009 and 2010? That’s when they were still dusting themselves down from the financial melt-down. Plus, there have been few takeovers in the past few years. It’s only now that the number is starting to increase again.
As the table below shows, there were 181 takeovers in 2008 and a percentage of 29.3% of abnormal price changes prior to the announcements. In 2013 there were only 53 takeovers. Obviously, fewer takeovers means less possibility of insider trading, doesn’t it?
It wasn’t until 1985 that insider dealing was made a criminal offense anyhow. It was the norm before that and the source of income that was exploited by traders. It wasn’t really until 2009 that the first insider-dealing prosecutions actually took place too. Before that it was just fines.
Worse still from the report is that the UK regulator is not even sure why there has been a drop in insider dealing. The report states: “We recognise that, at this stage, we do not know whether the FSA/ FCA’s actions are driving the improvement in the measure but the increase in the FSA’s enforcement activity and educational agenda and decrease in the market cleanliness statistic are roughly contemporaneous”. So, they don’t know, but they’ll take the credit anyhow. That way everyone’s a winner.
The measures are taken in a two-day period prior to the public announcement. All it would take is for the insider dealing to occur outside that two-day window for it to go unchecked; or alternatively for the insider dealing to take place but on a lower scale than in the past. It’s only abnormal and significant changes in share prices that are measured.
Attempting to make a profit by trading shares before any announcement has been made public is as old a profession as the oldest profession in the world you might seem to think these days. The oldest professions are still there and insider dealing is too. Whether the Financial Conduct Authority is trying to pull the wool over our eyes or whether it actually believes that there is less insider dealing is impossible to tell. But, one thing is for sure, the prostitutes of the financial sector, the ones that have sold their souls to refurbish their soles are still there. They are just doing it more covertly these days for fear of rocking the boat of social unrest too much.
Originally posted: Insider Trading? A Thing of the Past [4]
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