This study aims to examine the extent to which UK directors failed to report their share trading in the timeframe required by extant regulations in the run‐up to the changes in insider trading law contained in the Financial Services and Markets Act.
The study investigates the extent of non‐compliance amongst the 7,461 trades reported to the London Stock Exchange by the directors of UK firms in the year 2000.
The results indicate that 1,055 (or 14 per cent) of directors' trades were reported late (or with the transaction date absent), with these being concentrated amongst “buy” transactions in both absolute and pro‐rata terms.
The evidence suggests that non‐compliance in the reporting of directors' transactions was common at the time when UK authorities chose to toughen the legal framework governing the conduct of trading based on private price‐sensitive information. Once sufficient time has elapsed, further studies should be able to provide evidence about the iterative impact of the new legal framework by comparing results with the findings of this study.
This is the first study to report a detailed examination of the extent of non‐compliance in the timing of directors' trades in their own equity.
