The shortfall in financial markets regulation: Why New Zealand should revisit its insider trading laws

Abstract

Insider trading is an exceptionally challenging offence to define, prove, and enforce. New Zealand is a country especially vulnerable to this challenge, with no insider trading convictions since first regulating the offence in 1988. This paper investigates the reasons behind this, by comparing the structure of New Zealand’s legislation and enforcement to the United States and the European Union. A reform of the Financial Markets Conduct Act is suggested, with four main areas identified to enhance the strictness of New Zealand’s legislation. A novel approach to enforcement is also recommended, through the introduction of a rewards scheme for whistle-blowers to reduce the inherent difficulty of meeting the criminal standard of proof.