The level of insider trading on the stock market prior to takeover bids remained high at 23.7% in 2005, according to a report from the Financial Services Authority.
The FSA’s latest measurement of market cleanliness reveals there was a decrease in the level of possible informed trading ahead of takeover announcements from 32.4% in 2004 to 23.7% in 2005.
The report states: “But the level remains high and little changed from the situation in 2000 of 24% before the implementation of the Financial Services and Markets Act.”
More positively, in 2004/05 there was a significant decease in the level of possible informed trading ahead of FTSE 350 companies’ trading announcements, with just 2% of significant announcements being preceded by informed price movements compared to 11.1% in 2002/03 and 19.6% in 1998-2000.
The 2005 figures also include the six month period following the introduction of the new disclosure rules for listed companies under the Market Abuse Directive.
Sally Dewar, director of the markets division at the FSA, says: “We are pleased to see the improving trend in market cleanliness with the addition of the 2005 data. However, the figures for takeover announcements, although moving in the right direction, remain a cause for particular concern and there will be no let up in our efforts to tackle the problems in this area.”
The FSA says the review does have some limitations because it only focuses on insider trading, which is only one form of market abuse, and it only considers cash equities rather than derivatives or other instruments.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7034 2680 or email [email protected].IFAonline
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