Insider trading in Asia is like polygamy: In some places you can get away with it, but in others it gets you into a lot of trouble.
In New Zealand, some would-be insiders blatantly advertised for stock tips; in Taiwan, financial reporters drive to interviews in expensive European cars hardly commensurate with their salaries, and in Australia, three alleged inside traders were arrested at dawn and another committed suicide.
Insider trading, as dramatized in the movie “Wall Street,” is the use of insider or privileged information for profit in market transactions.
In real life, multimillionaire stock speculator Ivan F. Boesky went from Wall Street hero to a three-year prison term in 1987 after a federal investigation uncovered the largest insider trading scheme in U.S. history.
After the crackdown on Boesky, some other nations began to look more carefully at the way their share markets worked.
In Tokyo, the world’s largest stock market, many analysts believe the definition of insider trading in Japan is still much less strict than it is in the West.
“The Ivan Boesky incident came out in the U.S., and that started to push the theme here. Japan was complying with outside pressure,” said one broker. “But when you consider it in a Japanese context, it is seen as part of business.”
Japan last year announced harsher penalties for insider trading, partly because of pressure from the United States.
The revised law sets maximum penalties of $3,700 (500,000 yen) or six months in prison. But brokers said the penalties were small compared to the profits that can be made from a major insider deal.
Australian authorities have launched a highly publicized crackdown on what they claim is widespread insider trading in the securities industry.
Hard to Get Evidence
Three Melbourne finance industry executives were arrested in dawn raids early this month, and Sydney stockbroker Ian Story took his life last month while waiting to face insider trading charges.
But apart from publicizing their raids, investigators complain that they face problems gaining adequate evidence to secure convictions for what they say is often regarded as a fringe benefit of the job.
In New Zealand, a country once described as the last frontier for stock price manipulators, traders ran newspaper ads openly asking for inside information at the height of the pre-October, 1987, bull market.
“We do know of one group of persons who attempted to promote the activity through advertisement . . . . They were subsequently shown to be misguided and pathetic,” New Zealand Stock Exchange Executive Director Roger Gill said.
Under a new law that came into effect in December, 1988, insiders can be fined up to four times the gain that is made.
In Taiwan, the booming stock market is riddled with insider trading, market sources say.
“By U.S. standards, it is very common,” said Daniel Chiang, vice president of International Investment Trust.
Although there are numerous laws forbidding insider trading, they are very loosely enforced, he said.
The insider network includes many of Taiwan’s financial reporters, who are allowed to invest in stocks and can be seen driving expensive European cars. Most editors turn a blind eye to the profits.
In South Korea, officials and brokers say insider trading is rampant among major shareholders of listed companies.
“Insider trading is a nebulous subject here,” says Sean Goldrick, chief of Hoare Govett in Seoul. “Everyone knows it is widespread at management levels who are privy to a lot of things that are factual but not published openly.”
The Hong Kong stock market thrives on rumors, and inevitably many stem from inside knowledge, analysts say.
“I once told one of my Hong Kong clients about insider trading laws in the United States, and he asked, ‘You mean people buy and sell stock without knowing anything about the company?’ ” said a broker.