Abstract:
Insider trading is one of the practices that (directly or indirectly) lead to a host of
problems for example inaccurate stock market prices, high inflation, reduced public
investor confidence, misrepresentation and non disclosure of material facts relating to
securities and financial instruments. Again it reduces efficiency in the affected
companies and eventually leads to economic underperformance. The researcher
observed that the South African insider trading regulatory framework has some gaps and
flaws which need to be adequately addressed to ensure efficient and stable financial
markets. Therefore, the aim of this research is to provide a clear roadmap for an
effective, efficient, adequate and internationally competitive insider trading regulatory
framework in South Africa.
In order to achieve the above stated aim, the historical development of the regulation
insider trading is critically analyzed. The effectiveness and adequacy of the Insider
Trading Act, 135 of 1998 is also discussed. Furthermore, the prohibition of insider
trading under Securities Services Act, 36 of 2004 is explored and analyzed to investigate
its adequacy. The role of the Financial Services Board, the Courts and the Directorate
for Market Abuse is also scrutinized extensively. Moreover, a comparative analysis is
undertaken of the regulation of insider trading in other jurisdictions of United States of
America, Canada and Australia. This is done to investigate any lessons that can be
learnt or adopted from these jurisdictions. The researcher strongly contends that having
the best insider trading laws on paper alone will not secure the insider trading problem.
„ What is required are adequate laws that are enforced effectively in South African courts.
Therefore an adequate insider trading regulatory framework must be put in place to
improve the efficiency of South African financial markets‚ to maintain a stable economy,
combat misrepresentation and non disclosure of material facts in transactions relating to
securities.
