Is it “Essential” to Imprison Insider Dealers to Enforce Insider Dealing Laws?

Abstract

Drawing on general criminological research and literature on enforcement, this article comprehensively examines whether it is “essential” to employ imprisonment sanctions in the enforcement of market abuse regulations. The article takes an evidence-based and comparative approach to the question of sanctions and compares the effectiveness of criminal laws with other types of sanctions. It is envisaged that imprisonment sanctions should not be employed to sanction violations of insider dealing laws unless two conditions are fulfilled. First, it must be established that imprisonment sanctions are “effective” for the implementation of insider dealing laws. Secondly, it must be demonstrated that other alternative sanctions are not equally effective as custodial sanctions in the enforcement of insider dealing laws. Because of the expressive function of imprisonment sanctions and because insider dealers generally are rational calculators, it is submitted that imprisonment does have a deterrent effect and is therefore an effective sanction. Furthermore, because of the failure of alternative sanctions such as civil liability, fines and disqualification orders to express sufficiently strong moral condemnation and therefore deter insider dealing, imprisonment is argued to be “essential” for the enforcement of insider dealing laws.