Market Transactions and the Case of Insider Dealing: Drawing the Line Between Legal and Illegal Behaviour

The chapter explores the boundaries between legal and illegal behaviour in respect of insider dealing by examining the fundamentals of market transactions in order to establish the purpose of the ban. After observing the nature of voluntary transactions and, notably, George Akerlof’s Lemon Theory, the ban is placed within a theoretical framework where the Trinity of Information Regulation prevents the detrimental effects of information asymmetries and is balanced with the need to preserve competition among market participants, which is achieved by calibrating the notion of ‘inside information’. This leads to the conclusion that the ban is not about possession of inside information, but its abuse. The ban as articulated in Article 8 of MAR is examined as is the supplementary nature of Article 9. The chapter finishes by discussing the critique of the ban by Henry Manne et al and the need for reform in the proposed Listing Act package.