A New Look at the European Economic Community Directive on Insider Trading

On 13 November 1989, the European Council passed a directive on the regulation of insider trading. This legislation is designed to coordinate the various laws of the European Economic Community states and to encourage investor confidence in their securities markets. In analyzing the directive, the author proposes the United States experience in the regulation of insider trading as a model for the efforts of the EEC. Considering both the strengths and weaknesses of the United States experience, the author describes the United States shift in emphasis from the regulation of individuals to the regulation of institutions. This shift reflects the United States realization that no supervisory body can adequately regulate insider trading without the help of institutions. The EEC, confronted with a variety of marketplace configurations and a relative absence of strong regulatory bodies, could benefit from regulation of institutions as well. The author concludes that while the EEC has taken an important step toward regulating insider trading with its insider trading directive, the EEC could enhance its efforts to curtail insider trading by following the United States emphasis on the regulation of institutions and by the strengthening of penalties