Insider Trading: Rigged Market

Insider Trading in Nigeria

Do you know that we have insider trading law in Nigeria? Yes we do, but from my findings, not one person is prosecuted thus far, I stand to be corrected though. It is funny that our judiciary and government decided to be silent on ‘insider trading’ and its law in Nigeria. In the Nigerian corporate governance system, there is insider trading. Sections 614-624 of the Company and Allied Matters Act (CAMA) of 1990 is specially for insider trading.  Although, the 2004 edition of CAMA remained silent about it but its sections 279,280 and 282 which deal with the fiducial duties of company directors could be relied upon when bringing charges of insider trading against anyone. Again, sections 87, 88, and 93 of the Investment and Securities Act, 2004 covers issues relating to insider trading.

Insider Dealing

Well, NSE (Nigerian Stock Exchange) in 2020 tried to introduce the new “Insider Dealing” disclosure. This is to limit insider trading. To stop Directors, Executives and Senior Staff targeting and purchasing shares without informing the public. The sole purpose is to gain the trust of the public, ensuring transparency at all level. Companies are advised to always come to full disclosure of stock to the public. Lots of companies in Nigeria do not adhere to this, they engage in internal trading and claim ignorance.

Rigged Market

Some call it rigged market, others call it insider dealing also known as insider trading. Regardless of the name, it is an illegal practice that gives you an unfair advantage over other stockbrokers. In this context, you get non-public information about stock performance (stocks, bonds, stock options) hence cheating the system and other people without access to this classified information. It is a clear case of “a man who can see tomorrow” hence knowing what decisions to make before those events happen. Insider trading should be frowned at. It is an unethical practice, punishable by law and it also have the potential to destroy the stock market. 

Unethical Behavior

Directors and top management with privileged information use their intellect to act in best self selfish interest. They decide to either buy shares or sell because of the privileged information they have. It is a dangerous and unethical behavior. Beyond it being unethical, it is also illegal. If you are not ready to do the time, then do not do the crime or the law will catch up with you. Also, it is unethical and a clear case of cheating your fellow human. It is a practice that should be discouraged. It has personal and company implications and will destroy the stock market.

Flee Temptation

I advise that you run away from insider trading no matter the temptation. The government may choose to fold their hands now but they need only one scape goat. The ability to say no to temptation and stand firm on ethical acts is strength. When caught in the act of such activity, persons involved can either be sentenced to prison, fined or both. This ruins reputation. It cause established person to lose everything. Martha Stewart is a living example. She destroyed her empire with her hands. As moral individuals, we are responsible to protect the reputation and interests of the organization, general investors even the financial system we work.

What Can We Do Better?

For more effectiveness, Nigerian Stock Exchange need to put measures in place separating intentional insider trading from pure coincidence. This will stop making many claims ‘lucky’. I advise they open their eyes to probing individuals and companies to help curb insider trading. They need more resources to help deliver timely and promptly. This helps bring to book white-collar criminals and give justice. It is wrong that insider trading pursues only huge stock and criminal matter. Ethics need to cut across, both big and small, regardless of status. The ability to curb the small crimes will play a huge role in eradicating big crime. As a result of the above mentioned, I strongly believe Nigeria will become a new dawn as regards insider trading. Citizens will wake up to reality because ethics is a must.