A comparison of illegal insider trading in Canada and post-Communist China : globalized market economy and the role of law

Although insider trading is a worldwide problem, researchers in criminology have conducted surprisingly little research on this topic. This dissertation examines insider trading regulation in Canada and China from a socio-legal perspective. The purpose of the study is to compare the social, political, economic, and legal origins of insider trading regulations and their enforcement in the two countries. The dissertation begins with a historical account of insider trading legislation and policies in Canada (since the Kimber Report of 1965-66) and China (since the Provisional Measures Controlling Securities Firms of 1990). The central focus of this dissertation is on insider trading enforcement mechanisms. Major administrative and court cases are discussed in detail to illustrate how the insider trading offence is constructed in the different contexts of the established capitalist system in Canada and the socialist market economy in China, and how the securities regulatory commissions in the two jurisdictions have worked to enforce insider trading laws. A major finding of the study is the paucity of insider trading cases and the lack of convictions for insider trading offences in both countries. Chinese insider trading regulation is more government-run, while the Canadian regulatory scheme is more industry and market oriented. In both cases, the threat of severe penalties should not be considered automatically effective. Canada and China have similarly lenient insider trading law enforcement. As the infrequency of insider trading cases in the two countries shows, the absence of a regular and consistent enforcement of the law is also a significant problem both in China and in Canada. A primary challenge to enforcement comes from the fact that insider trading cases are too difficult to detect and prove in court. In addition, the relationship between the government officials and corporations is close and strong in both countries, though in different ways. The effectiveness of anti-insider trading provisions will arguably depend, in part, upon how the regulatory authorities charged with their administration conduct their work.