Market watchdog proposes rule amendments to give it broader discretion to punish insider trading and market manipulation

The Capital Markets Integrity Corp. (CMIC) [link] has proposed amendments to the CMIC Rules to give the CMIC more “latitude” in imposing sanctions on trading participants and a “freer hand” in exempting trading participants from the imposition of those sanctions under certain circumstances. The main amendments are to Section 4 - Types of Sanctions, which would: (1) insert a second level of monetary sanctions between the small fines for a “first violation” and the imposition of a denial of trading rights and access to trading infrastructure for a “second violation”; (2) add a new sanction type called “disgorgement”, which would allow CMIC to seek damages equivalent to up to twice the value of “any gains unlawfully obtained”; and (3) increase the minimum fine for a fourth “major” violation to P100,000. CMIC said that the rule changes are intended to support its stated policy of “minimizing, if not totally eliminating insider trading” and “manipulation” that creates “distortions in the free market.”

MB bottom-line: As we have covered several times before, it is the CMIC’s job to monitor the market and investigate and punish insider trading and market manipulation. While I support any action that attacks insider trading from CMIC or any other component of the market’s regulatory framework, I don’t think that same framework has earned the benefit of the doubt on this topic. What good is a complex matrix of sanctions if the “PSE Police” never leave the precinct? I’ll get excited about this watchdog’s bite when I hear it bark. Right now, it seems like the dog is still asleep. You can do it, CMIC! Thankfully, it has a backlog of suspicious trades that it can use to practice exercising these new enforcement powers.

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