Selected Flaws Hampering the Enforcement of the Insider Trading Prohibition by Key Role-Players in Zimbabwe
Keywords:
role-players, market integrity, flaws, insider trading, regulationAbstract
Insider trading is one of the illicit market abuse trading practices that are hampering the stability, viability, efficiency and integrity of the Zimbabwean financial markets. In this regard, it is submitted that the Zimbabwean anti-insider trading regulatory framework has not been very successful to date owing to various flaws and factors such as the gaps in the functions and regulatory powers of regulatory bodies, the lack of insider trading awareness and educational programmes, inadequate financial resources and the inconsistent co-operation between the regulatory bodies and other relevant enforcement authorities in Zimbabwe. These and other related flaws have culminated into various challenges such as poor market efficiency, poor market integrity, high market volatility and low public investor confidence in the Zimbabwean financial markets. This could further indicate that insider trading activities are still poorly regulated in Zimbabwe under the Securities Act 17 of 2004 [Chapter 24:25] as amended (Securities Act). Consequently, the article investigates the gaps and flaws in the current anti-insider trading regulatory framwork under the Securities Act. This is done in order to recommend possible measures that could be employed by the relevant enforcement authorities, policy makers and other key role-players to effectively combat insider trading activities in the Zimbabwean financial markets.
Keywords: role-players; market integrity; flaws; insider trading; regulation.
References
References
Anderson, J.P. (2015). “What’s the Harm in Issuer-Licensed Insider Trading?” University of Miami Law Review, 69, pp. 795-810.
Arshadi, N. (1998). “Insider Trading Liability and Enforcement Strategy”. Financial Management, pp.70-84.
Austin, J.E. (2016). When Insider Trading and Market Manipulation Cross Jurisdictions: What Are the Challenges For Securities Regulators and How Can They Best Preserve the Integrity of Markets?. PHD-Thesis: York University, Toronto, Canada.
Beny, L.N. (2007). Insider Trading Laws and Stock Markets Around the World: An Empirical Contribution to the Theoretical Law and Economics Debate. The Journal of Corporation Law, 32(2), pp. 237-300.
Bhana, N. (1987). “Take-over Announcements and Insider Trading Activity on the Johannesburg Stock Exchange”. South African Journal of Business Management, 18(4), pp. 198-208.
Botha, D. (1991). “Control of Insider Trading in South Africa: A Comparative Analysis”. South African Mercantile Law Journal, 3, pp. 1-18.
Cinar, E.M. (1999). “The Issue of Insider Trading in Law and Economics: Lessons for Emerging Financial Markets in The World”. Journal of Business Ethics, 19(4), pp. 345-353.
Chitimira, H. (2015). The Regulation of Insider Trading in Australia: A Historical and Comparative Analysis. Speculum Juris, 29(1), pp. 86–107.
Chitimira, H. and Lawack, V.A. (2013). “Overview of the Role-Players in the Investigation, Prevention and Enforcement of Market Abuse Provisions in South Africa”. Obiter, 34(2), pp. 200-217.
Chitimira, H. (2012). A Comparative Analysis of the Enforcement of Market Abuse Provisions. LLD-Thesis: Nelson Mandela Metropolitan University, South Africa.
Chitimira, H. (2014). “Overview of Selected Role–Players in the Detection and Enforcement of Market Abuse Cases and Appeals in South Africa”. Speculum Juris, 28(1), 107-123.
Chitimira, H. (2014). “Overview of the Market Abuse Regulation under the Financial Markets Act 19 of 2012”. Obiter, 35(2), pp. 254-271.
Coomber, J. (2010). Zimbabwe’s Economic Crisis and Hyperinflation 1997 – 2009. Masters in Financial Management dissertation: University of Cape Town.
Dalley, P.J. (1998). “From Horse Trading to Insider Trading: The Historical Antecedents of the Insider Trading Debate”. William and Mary Law Review, 39(4), pp. 1289-1353.
Dent, G.W. (2013). “Why Legalized Insider Trading Would Be a Disaster”. Delaware Journal of Corporate Law, 38, pp. 247-273.
Organisation for Economic Co-operation and Development. (2014). Public Enforcement and Corporate Governance in Asia: Guidance and Good Practices. Organisation for Economic Co-operation and Development Publishing.
Dooley, M.P. (1980). “Enforcement of Insider Trading Restrictions”. Virginia Law Review, 66(1), pp. 1-83.
Douglas, N.S. (1988). “Insider Trading: The Case Against the ‘Victimless Crime’ Hypothesis”. The Financial Review, 23(2), pp. 127-142.
Figueroa, D. (2014). “Insider Trading and Other Securities Frauds in the United States: Lessons for Chile”. Michigan Business and Entrepreneurial Law Review, 3(2), pp. 166-212.
Flynn, R.C. (1992). “SEC Distribution Plans in Insider Trading Cases”. The Business Lawyer, pp. 107-139.
Gething, M. (1998). “Insider Trading Enforcement: Where are We Now and Where do We Go from Here?”. Company and Securities Law Journal,16, pp. 607-627.
Gilson, R.J. and Kraakman, R.H. (1984). “The Mechanisms of Market Efficiency”. Virginia Law Review, 70(4), pp. 549-644.
Grundfest, J.A. (2016). “Fair or Foul: SEC Administrative Proceedings and Prospects for Reform through Removal Legislation”. Fordham Law Review, 85(3), pp.1143-1188.
Guttentag, M. (2017). “Selective Disclosure and Insider Trading”. Florida Law Review, 69(2), pp. 520-570.
Hopt, K.J. (1986). “The German Insider Trading Guidelines - Spring-Gun or Scarecrow?”. Journal of Comparative Business and Capital Market Law, 8, pp. 381-400.
Jooste, R. (2000). “The Regulation of Insider Trading in South Africa: Another Attempt”. The South African Law Journal, 17, pp. 283-286.
Karjala, D.S. (1982). “Statutory Regulation of Insider Trading in Impersonal Markets”. Duke Law Journal, 4, pp. 627-650.
Linciano, N. (2003). “The Effectiveness of Insider Trading Regulation in Italy: Evidence from Stock-Price Run-ups Around Announcements of Corporate Control Transactions”. European Journal of Law and Economics, 16(2), pp. 199-218.
Loke, A.F. (2007). The Protected Interests in the Private Right of Action for Insider Trading: A Comparative Perspective. Journal of Corporate Law Studies, 7(2), pp. 307-335.
Madende, L.T. (2015). An Assessment of the Regulatory Philosophy of the Securities and Exchange Commission of Zimbabwe (2009-2014). MBA Dissertation: University of Zimbabwe.
Mataruka, T. and Mahombera, N. (2018). Market Abuse Regulatory Interview, conducted by the authors at the Securities and Exchange Commission of Zimbabwe (SECZ) with Mataruka (Legal and Licensing Officer of the SECZ) and Mahombera (Surveillance and Risk Manager of the SECZ), on 29 June 2018.
Misra, M. (2011). “Insider Trading: Indian Perspective on Prosecution of Insiders”. Journal of Financial Crime, 18(2), pp. 162-168.
Mokone, P.P. (2018). The Regulation of Insider Trading in Zimbabwe: Proposals for Reform. LLD-Thesis: North West University, South Africa.
Massawe, H.T. and Kadilu, M. (2014). “Combatting Insider Trading in Tanzania: The Adequacy of the Capital Markets and Securities Act of 1994 and the Companies Act of 2002”. Law in Africa, 17, pp. 52-63.
Munangagwa, C.L. (2009). “The Economic Decline of Zimbabwe”. Gettysburg Economic Review, 3(1), pp. 110-129.
Mwenda, K.K. (1997). “Redefining Insider Dealing Law for Emerging Markets: A Comparative Legal Study”. The Zimbabwe Law Review, 14, pp. 29-46.
Mwenda, KK. (1996-1999). “Insider Dealing Law in Zambia: A Flawed Concept”. University of Ghana Law Journal, 20, pp.137-156.
Öberg, J. (2014). “Is it ‘Essential’ to Imprison Insider Dealers to Enforce Insider Dealing Laws?”. Journal of Corporate Law Studies, 14(1), pp. 111-138.
Osode, P.C. “Defending The Regulation of Insider Trading on Basis of Sound Legal Orthodoxy: The Fiduciary Obligations Theory Law” in Okpaluba, C. (ed). (2004). Law in Contemporary South African Society. Cape Town: New Africa Books South Africa.
Osode, P.C. (2000). “The New South African Insider Trading Act: Sound Law Reform or Legislative Overkill?”. Journal of African Law, 44(2), pp. 239-263.
Palan, S. and Stockl, T. (2017). “When Chasing the Offender Hurts the Victim: The Case of Insider Legislation”. Journal of Financial Markets, 35, pp. 104-129.
Periyasamy, S. and Kumar, M.A. (2016). “Impact of Investor Awareness Program on Prospective Investors in the Indian Stock Markets”. International Journal of Research in Commerce, IT & Management, 6(2), pp. 21-23.
Perino, A.M. (2019). “The Lost History of Insider Trading”. University of Illinois Law Review, 3, pp. 951-1004.
Pillai, D., Shah, R. and Kar, S. “Impact of Insider Trading on Investment Decision by Investors”. (2014). International Journal of Advance Research in Computer Science and Management Studies, 2(4) pp. 249-258.
Saungweme, P, Ricardo, P. and Pradeep, B. (2013). “A Framework for Combating Insider Trading on Developing Stock Exchanges: Evidence from the Zimbabwean Stock Exchange”. African Journal of Business Management, 7(17), pp. 1630-1639.
Spitz, M.A. “Recent Developments in Insider Trading Laws and Problems of Enforcement in Great Britain”. (1989). Boston College International and Comparative Law Review, 12, pp. 265-290.
Shen, H. (2008). “A Comparative Study of Insider Trading Regulation Enforcement in the US and China”. Journal of Business and Securities Law, 9(1), pp. 41-74.
Tomasic, R. (1991). “Insider Trading Law Reform in Australia”. Company and Securities Law Journal, 9, pp. 121-143.
Tsaurai, K. and Odhiambo, N.M. (2012). “The Dynamics of Capital Market Development in Zimbabwe”. Corporate Ownership and Control Journal, 9(2), pp. 355-363.
Rowe, M. and McAllister, L. (2006). “The Roles of Commissions of Inquiry in the Policy Process”. Public Policy and Administration, 21(4), pp. 99-115.
Van Deventer, G. (2009). Harnessing Administrative Law in Encouraging Compliance. Financial Services Board Bulletin, 1, pp. 3-4.
Van Osselaer, A.P. (2017). “Insider Trading Enforcement and Link Prediction”. Texas Law Review. 96(2), pp. 399-424.
Wang, W.K.S. (2009). “Measuring Insider Trading Damages for a Private Plaintiff”. U.C. Davis Business Law Journal, 10(1), pp. 1-32.
Internet Sources
International Organization of Securities Commissions. (2003). “Insider Trading How Jurisdictions Regulate it”. Report of the Emerging Markets Committee of the International Organization of Securities Commissions, accessed https://www.iosco.org/library/pubdocs/pdf/IOSCOPD145.pdf last accessed 21 January 2021.
Magaisa, A.T. (2006). “Regulating Insider Trading”. https://www.theindependent.co.zw/2006/06/16/regulating-insider-trading/ last accessed 17 January 2021.
Muronzi, C. (2017). “Tycoons in Nasty CFI Control Battle”. https://www.theindependent.co.zw/2017/07/21/tycoons-nasty-cfi-control-battle/ accessed 22 January 2021.
Securities and Exchange Commission of Zimbabwe. (2017). “Supervision Licensing and Surveillance”. https://seczim.co.zw/management-departments/supervision-licensing-and-surveillance/ accessed 22 January 2021.
Zimbabwe Stock Exchange. (2015). “Launch of the Zimbabwe Stock Exchange’s Automated Trading System” https://www.african-markets.com/en/stock-markets/zse/launch-of-the-zimbabwe-stock-exchange-s-automated-trading-system accessed 22 January 2020.
Anderson, J.P. (2015). “What’s the Harm in Issuer-Licensed Insider Trading?” University of Miami Law Review, 69, pp. 795-810.
Arshadi, N. (1998). “Insider Trading Liability and Enforcement Strategy”. Financial Management, pp.70-84.
Austin, J.E. (2016). When Insider Trading and Market Manipulation Cross Jurisdictions: What Are the Challenges For Securities Regulators and How Can They Best Preserve the Integrity of Markets?. PHD-Thesis: York University, Toronto, Canada.
Beny, L.N. (2007). Insider Trading Laws and Stock Markets Around the World: An Empirical Contribution to the Theoretical Law and Economics Debate. The Journal of Corporation Law, 32(2), pp. 237-300.
Bhana, N. (1987). “Take-over Announcements and Insider Trading Activity on the Johannesburg Stock Exchange”. South African Journal of Business Management, 18(4), pp. 198-208.
Botha, D. (1991). “Control of Insider Trading in South Africa: A Comparative Analysis”. South African Mercantile Law Journal, 3, pp. 1-18.
Cinar, E.M. (1999). “The Issue of Insider Trading in Law and Economics: Lessons for Emerging Financial Markets in The World”. Journal of Business Ethics, 19(4), pp. 345-353.
Chitimira, H. (2015). The Regulation of Insider Trading in Australia: A Historical and Comparative Analysis. Speculum Juris, 29(1), pp. 86–107.
Chitimira, H. and Lawack, V.A. (2013). “Overview of the Role-Players in the Investigation, Prevention and Enforcement of Market Abuse Provisions in South Africa”. Obiter, 34(2), pp. 200-217.
Chitimira, H. (2012). A Comparative Analysis of the Enforcement of Market Abuse Provisions. LLD-Thesis: Nelson Mandela Metropolitan University, South Africa.
Chitimira, H. (2014). “Overview of Selected Role–Players in the Detection and Enforcement of Market Abuse Cases and Appeals in South Africa”. Speculum Juris, 28(1), 107-123.
Chitimira, H. (2014). “Overview of the Market Abuse Regulation under the Financial Markets Act 19 of 2012”. Obiter, 35(2), pp. 254-271.
Coomber, J. (2010). Zimbabwe’s Economic Crisis and Hyperinflation 1997 – 2009. Masters in Financial Management dissertation: University of Cape Town.
Dalley, P.J. (1998). “From Horse Trading to Insider Trading: The Historical Antecedents of the Insider Trading Debate”. William and Mary Law Review, 39(4), pp. 1289-1353.
Dent, G.W. (2013). “Why Legalized Insider Trading Would Be a Disaster”. Delaware Journal of Corporate Law, 38, pp. 247-273.
Organisation for Economic Co-operation and Development. (2014). Public Enforcement and Corporate Governance in Asia: Guidance and Good Practices. Organisation for Economic Co-operation and Development Publishing.
Dooley, M.P. (1980). “Enforcement of Insider Trading Restrictions”. Virginia Law Review, 66(1), pp. 1-83.
Douglas, N.S. (1988). “Insider Trading: The Case Against the ‘Victimless Crime’ Hypothesis”. The Financial Review, 23(2), pp. 127-142.
Figueroa, D. (2014). “Insider Trading and Other Securities Frauds in the United States: Lessons for Chile”. Michigan Business and Entrepreneurial Law Review, 3(2), pp. 166-212.
Flynn, R.C. (1992). “SEC Distribution Plans in Insider Trading Cases”. The Business Lawyer, pp. 107-139.
Gething, M. (1998). “Insider Trading Enforcement: Where are We Now and Where do We Go from Here?”. Company and Securities Law Journal,16, pp. 607-627.
Gilson, R.J. and Kraakman, R.H. (1984). “The Mechanisms of Market Efficiency”. Virginia Law Review, 70(4), pp. 549-644.
Grundfest, J.A. (2016). “Fair or Foul: SEC Administrative Proceedings and Prospects for Reform through Removal Legislation”. Fordham Law Review, 85(3), pp.1143-1188.
Guttentag, M. (2017). “Selective Disclosure and Insider Trading”. Florida Law Review, 69(2), pp. 520-570.
Hopt, K.J. (1986). “The German Insider Trading Guidelines - Spring-Gun or Scarecrow?”. Journal of Comparative Business and Capital Market Law, 8, pp. 381-400.
Jooste, R. (2000). “The Regulation of Insider Trading in South Africa: Another Attempt”. The South African Law Journal, 17, pp. 283-286.
Karjala, D.S. (1982). “Statutory Regulation of Insider Trading in Impersonal Markets”. Duke Law Journal, 4, pp. 627-650.
Linciano, N. (2003). “The Effectiveness of Insider Trading Regulation in Italy: Evidence from Stock-Price Run-ups Around Announcements of Corporate Control Transactions”. European Journal of Law and Economics, 16(2), pp. 199-218.
Loke, A.F. (2007). The Protected Interests in the Private Right of Action for Insider Trading: A Comparative Perspective. Journal of Corporate Law Studies, 7(2), pp. 307-335.
Madende, L.T. (2015). An Assessment of the Regulatory Philosophy of the Securities and Exchange Commission of Zimbabwe (2009-2014). MBA Dissertation: University of Zimbabwe.
Mataruka, T. and Mahombera, N. (2018). Market Abuse Regulatory Interview, conducted by the authors at the Securities and Exchange Commission of Zimbabwe (SECZ) with Mataruka (Legal and Licensing Officer of the SECZ) and Mahombera (Surveillance and Risk Manager of the SECZ), on 29 June 2018.
Misra, M. (2011). “Insider Trading: Indian Perspective on Prosecution of Insiders”. Journal of Financial Crime, 18(2), pp. 162-168.
Mokone, P.P. (2018). The Regulation of Insider Trading in Zimbabwe: Proposals for Reform. LLD-Thesis: North West University, South Africa.
Massawe, H.T. and Kadilu, M. (2014). “Combatting Insider Trading in Tanzania: The Adequacy of the Capital Markets and Securities Act of 1994 and the Companies Act of 2002”. Law in Africa, 17, pp. 52-63.
Munangagwa, C.L. (2009). “The Economic Decline of Zimbabwe”. Gettysburg Economic Review, 3(1), pp. 110-129.
Mwenda, K.K. (1997). “Redefining Insider Dealing Law for Emerging Markets: A Comparative Legal Study”. The Zimbabwe Law Review, 14, pp. 29-46.
Mwenda, KK. (1996-1999). “Insider Dealing Law in Zambia: A Flawed Concept”. University of Ghana Law Journal, 20, pp.137-156.
Öberg, J. (2014). “Is it ‘Essential’ to Imprison Insider Dealers to Enforce Insider Dealing Laws?”. Journal of Corporate Law Studies, 14(1), pp. 111-138.
Osode, P.C. “Defending The Regulation of Insider Trading on Basis of Sound Legal Orthodoxy: The Fiduciary Obligations Theory Law” in Okpaluba, C. (ed). (2004). Law in Contemporary South African Society. Cape Town: New Africa Books South Africa.
Osode, P.C. (2000). “The New South African Insider Trading Act: Sound Law Reform or Legislative Overkill?”. Journal of African Law, 44(2), pp. 239-263.
Palan, S. and Stockl, T. (2017). “When Chasing the Offender Hurts the Victim: The Case of Insider Legislation”. Journal of Financial Markets, 35, pp. 104-129.
Periyasamy, S. and Kumar, M.A. (2016). “Impact of Investor Awareness Program on Prospective Investors in the Indian Stock Markets”. International Journal of Research in Commerce, IT & Management, 6(2), pp. 21-23.
Perino, A.M. (2019). “The Lost History of Insider Trading”. University of Illinois Law Review, 3, pp. 951-1004.
Pillai, D., Shah, R. and Kar, S. “Impact of Insider Trading on Investment Decision by Investors”. (2014). International Journal of Advance Research in Computer Science and Management Studies, 2(4) pp. 249-258.
Saungweme, P, Ricardo, P. and Pradeep, B. (2013). “A Framework for Combating Insider Trading on Developing Stock Exchanges: Evidence from the Zimbabwean Stock Exchange”. African Journal of Business Management, 7(17), pp. 1630-1639.
Spitz, M.A. “Recent Developments in Insider Trading Laws and Problems of Enforcement in Great Britain”. (1989). Boston College International and Comparative Law Review, 12, pp. 265-290.
Shen, H. (2008). “A Comparative Study of Insider Trading Regulation Enforcement in the US and China”. Journal of Business and Securities Law, 9(1), pp. 41-74.
Tomasic, R. (1991). “Insider Trading Law Reform in Australia”. Company and Securities Law Journal, 9, pp. 121-143.
Tsaurai, K. and Odhiambo, N.M. (2012). “The Dynamics of Capital Market Development in Zimbabwe”. Corporate Ownership and Control Journal, 9(2), pp. 355-363.
Rowe, M. and McAllister, L. (2006). “The Roles of Commissions of Inquiry in the Policy Process”. Public Policy and Administration, 21(4), pp. 99-115.
Van Deventer, G. (2009). Harnessing Administrative Law in Encouraging Compliance. Financial Services Board Bulletin, 1, pp. 3-4.
Van Osselaer, A.P. (2017). “Insider Trading Enforcement and Link Prediction”. Texas Law Review. 96(2), pp. 399-424.
Wang, W.K.S. (2009). “Measuring Insider Trading Damages for a Private Plaintiff”. U.C. Davis Business Law Journal, 10(1), pp. 1-32.
Internet Sources
International Organization of Securities Commissions. (2003). “Insider Trading How Jurisdictions Regulate it”. Report of the Emerging Markets Committee of the International Organization of Securities Commissions, accessed https://www.iosco.org/library/pubdocs/pdf/IOSCOPD145.pdf last accessed 21 January 2021.
Magaisa, A.T. (2006). “Regulating Insider Trading”. https://www.theindependent.co.zw/2006/06/16/regulating-insider-trading/ last accessed 17 January 2021.
Muronzi, C. (2017). “Tycoons in Nasty CFI Control Battle”. https://www.theindependent.co.zw/2017/07/21/tycoons-nasty-cfi-control-battle/ accessed 22 January 2021.
Securities and Exchange Commission of Zimbabwe. (2017). “Supervision Licensing and Surveillance”. https://seczim.co.zw/management-departments/supervision-licensing-and-surveillance/ accessed 22 January 2021.
Zimbabwe Stock Exchange. (2015). “Launch of the Zimbabwe Stock Exchange’s Automated Trading System” https://www.african-markets.com/en/stock-markets/zse/launch-of-the-zimbabwe-stock-exchange-s-automated-trading-system accessed 22 January 2020.
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2021-11-22
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Chitimira, H. (2021). Selected Flaws Hampering the Enforcement of the Insider Trading Prohibition by Key Role-Players in Zimbabwe: Array. Acta Universitatis Danubius. Juridica, 18(2). Retrieved from https://dj.univ-danubius.ro/index.php/AUDJ/article/view/988
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