The Ultimate Truth on Preventing Market Abuse – It Can’t be Done

OilPrice.com ^ | 06/04/2010 | Dave Forest

[Faketan]

I just finished reading a 144-page document from the Committee of European on ways to prevent market abuse. The paper discusses myriad ways regulators can browbeat listed companies into following disclosure rules. Basically, it's 144 pages on how to force people to tell the truth.

Here's the ultimate truth on market regulation. It can't be done.

We have insider-trading rules that require company officials to report their personal buying of stock in the companies they own and run. We want to know if the CEO is driving the stock up, or blowing out his holdings ahead of bad news.

This is good in theory. Except that sophisticated company managers simply set up offshore accounts and run up or blow out of their companies without their name ever appearing. This happens all the time.

So we implement more rules. We spend millions on regulatory firepower to increase monitoring and prosecution. We produce huge reports like the one I mentioned. Making it ever more complicated for companies to list and stay listed. Full article at: Market Abuse

[arthurus]

The more government regulation there is the more handles there are for “abuse.” Every regulation puts a man in line for a bribe in order to wink at the regulation in favor of the briber and to enforce it more broadly and severely against those who do not bribe. The more government involvement there is in business at any level for any reason the more corruption is introduced into the market. No exceptions. Consider the Bailout.

[1010RD]

The more laws, the more law-breakers.

[jimfree]

I’m a business process analyst by day and for decades I’ve said that people will use the tools and methods they need to get the job done regardless of what management provides them. If the process is too hard people will work around it. The same clearly goes for regulation. When compliance is simple folks will comply.

SarbOx was a bucket of worms disguised as reform and has driven some companies overseas. What will Dodd-Franks financial reform do for us? It will simply blur their fingerprints and induce some banks to headquarter in Hong Kong or Singapore.