Theoretical and practical difficulties in regulating insider trading in South Africa and possible mechanisms of improvement of shortcomings in the regulatory framework

Abstract

Anti-insider trading provisions were initially enacted to inter alia; enhance confidence in South African financial markets by contributing to the maintenance of a stable financial market environment by promoting the international competitiveness of investors in securities services in the country. In attempts to determine whether the Insider trading regulations are indeed effective at deterring insider trading contraventions as well as enforcing contraventions thereof, the research will subsequently examine the relevant legislation which pertains to insider trading in South Africa as well as analyse any definitional ambiguities and difficulties caused therein. Wherefore other than where the definitions in the legislation is lacking, the research will further discuss what additional problems are drawn from the current legislative insider trading framework. An analysis will be done regarding the difficulties experienced by the Financial Sector Conduct Authority (hereafter the FSCA or the Regulator) as the entity responsible for the supervision of compliance with market abuse provisions in discharging of its duties as a result of the current legislation and/or the lack of clarity therefore. A comparative study will consequently be conducted in the research to establish how Australia has arguably become acknowledged to have the most progressive and developed market abuse legislation in the world compared to that of South Africa. Ultimately, recommendations will be presented using the above comparisons on what mechanisms can be adopted to improve on South Africa’s regulation of insider trading.