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Structural Problems in the Design of Market Abuse Regulations in the EU

Author

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  • Peter-Jan Engelen

    (Utrecht University, Utrecht School of Economics, the Netherlands; Tjalling C. Koopmans Research Institute, the Netherlands, Janskerkhof 12, 3512 BL Utrecht, the Netherlands. E-mail: p.engelen@econ.uu.nl)

Abstract

This article analyzes the regulatory and supervisory design of market abuse regulations in the EU in order to set the right incentives for corporate insiders to abstain from illegal trading. The analysis is illustrated by the Belgian insider trading law. Although the level of punishment seems to be rather high, the probability of conviction for insider trading is very low. The analysis suggests that the expected costs component of this crime is too low compared to the expected insider trading profits. In order to obtain a higher deterrence of the insider trading prohibition, a change in the design of the financial regulation and supervision must be made. To increase the probability of conviction broad investigative powers and the authority to impose administrative sanctions have to be assigned to the financial markets supervisor, as was recently the case with the European Market Abuse Directive. JEL classification: K42

Suggested Citation

  • Peter-Jan Engelen, 2007. "Structural Problems in the Design of Market Abuse Regulations in the EU," Journal of Interdisciplinary Economics, , vol. 19(1), pages 57-82, October.
    • Handle: RePEc:sae:jinter:v:19:y:2007:i:1:p:57-82
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    File URL: http://jie.sagepub.com/content/19/1/57.abstract
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    Citations

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    Cited by:

    1. Peter-Jan Engelen, 2011. "Legal versus Reputational Penalties in Deterring Corporate Misconduct," Chapters, in: Mehmet Ugur & David Sunderland (ed.), Does Economic Governance Matter?, chapter 4, Edward Elgar Publishing.

    More about this item

    Keywords

    market abuse; regulatory design; supervisory policy; enforcement; criminal behaviour;
    All these keywords.

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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