Lets investors spend less time and money searching for information Share prices

Lets investors spend less time and money searching

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Let’s investors spend less time and money searching for information Share prices become “more accurate” quicker than it would have been and reflect information more accurately 3. Why might the costs and benefits of insider trading be different in a market like the US or UK versus European or other markets? How does the pattern of ownership and corporate governance differ? More concentrated ownership in European markets and more dispersed ownership in UK and US markets o makes insider trading more productive in Europe because investors have more access to information and more to gain from trading. Higher secrecy makes it more difficult to prove. “Anglo” (US, UK) vs “Continental” (Europe, Japan) approach Continental countries rely on direct control or management of markets by officials whereas Anglo countries tend to build on existing self-regulation by supplementing it with regulatory oversight o Closer regulation of Continental approach limits entry, favors larger institutions and reinforces market power o Anglo approach is more conducive to entry and to competition In some countries, enforcement responsibility is spread among a number of bodies so none has enough power to be effective o The lack of a centralized enforcement agency makes it extremely difficult to prosecute offenders with Britain having only 30 of 1000 cases since 1987 end in prosecutions Nothing remotely close to a unified European financial markets regulatory body to coordinate cross-border investigations o Insider traders often hide behind partner across borders (esp Luxembourg which has tight banking secrecy) Difference in mindset: In Europe, people being sly are commended; ex. in Italy for decades, people only traded on information and it is now being considered a crime B. Read “The Enron Collapse: A Look Back”(20.2), “Shedding Light on SOX” (Item 20.7) and “Escape from Wall Street”(Item 20.10) and answer the following: 1. What problems was Sarbanes-Oxley intended to address? What events precipitated its passage? The SOX corporate accountability rules were put in place in 2002 following the Enron and Worldcom scandals to promote the accuracy of financial reporting for publicly held companies.
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The Act heightened the consequences for destroying, altering or fabricating financial records, and for trying to defraud shareholders. The Enron scandal drew attention to accounting and corporate fraud , as its shareholders lost $74 billion in the four years leading up to its bankruptcy, and its employees lost billions in pension benefits. The Sarbanes-Oxley Act has been called a "mirror image of Enron: the company's perceived corporate governance failings are matched virtually point for point in the principal provisions of the Act." Intended to “enhance corporate responsibility, enhance financial disclosures and combat corporate and accounting fraud” o Corporations destroying, fabricating financial records, trying to defraud shareholders o Corporations would do all of this so investors would still buy their stocks
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