Arguments against Regulation
An insider dealing regulation is said to eliminate market distortion. Insider dealings bring inequalities in the market. This means that some people are at an unfairly gained advantage as compared to the rest of the public. These market regulations remove these inequalities paving the way for a fair arena of doing business for all the people.
It is also capable of enhancing the market fluidity. When investors know what is going to happen in the future, they take caution where needed thus lowering the rate at which investors take risks. Insider dealings lower this risk thus limiting the market liquidity. On the other hand, a regulation leaves the investors with no option but to take an investing risk. This promotes market liquidity.
A regulation will act as a barometer to the company’s financial health. This means that a regulation will enable the concerned authorities to monitor the transparency in terms of the investments dealings which also includes investigating the concerned investors. Through the regulation, financial culprits can easily be found.
The regulation enables the company to reach a high market value since it eliminates unfair and illegal investments/transactions. It makes it easier for the concerned authorities to easily monitor a suspect and deal with the culprit companies, thus putting the deserved companies at the top. Investors have faith in these companies.
As earlier noted, companies in the high value markets attract more investors as compared to other companies. Such a regulation makes the investors have confidence in these high ranking companies, as they know that the companies deserve since they are well vetted. The investors feel like on “jumping on” an investing opportunity once it turns up.
A regulation reduces the speculation chances. Inside dealings enable the investors to invest with certainty of a return on their money. This reduces the risks taken when people get loans in order to invest in shares. Although this is both an advantage and a disadvantage, the banks lend less while the investors get loans with precautions.
Laws are known to reduce the efficiency in a market. Interference of governing bodies with rules and regulations destroy the activities dictated by the forces of supply and demand amongst other market forces. These forces make the market self efficient. An insider dealing regulation will only interfere with forces that cause inequality and uneven market grounds.
Innovative insiders are heavily rewarded by this regulation. Those insiders who can be able to maneuver their way into investing by having confirmed the final outcome are greatly rewarded. However, such a regulation will enable those insiders who choose to take up a risk and invest, reap the rewards they deserve in the right way