Japan's FSA has introduced yet another way to watch over the unruly companies so that they do not hurt easy-to-trick Japanese investors. Surcharges for insider dealing were significantly increased, and now they should at least match the amount gained by improper use of the insider information.
In principle, this is the right thing to do - insider dealing must be punished. But, viewed from a broader perspective, this is yet another step in tightening the screws in financial regulation that has been under way in the recent years.
In my opinion, this is how the hardliners in FSA are trying to restrain investors from being active. Admittedly, they might have some reasons to believe this is a right thing to do. Say "shareholder activist", and the name you will hear in Japan is Yoshiaki Murakami - the one of the few who tried to assert more power for shareholders over the traditionally indifferent Japanese companies. He ended up convicted for insider dealing, and seemingly, this translated into FSA perception of shareholder activism as a whole - they are dirty scoundrels trying to bluntly pillage companies at the cost of social cohesion these companies have been providing for decades. So, the regulation was kept being tightened more and more, the message to investors being - 'you don't need to think, the regulators will protect your interests'.
Is this how you achieve efficient financial markets and maximize shareholder benefits? Hardly.
One thing to look at is how attractive are Japan's borses to outsiders. The tightening regulation made many foreign companies looking for listing in Asia to consider Hong Kong and Singapore - markets far inferior to Tokyo in their size.
I believe the regulators should focus on investors education, rather than making life more difficult for everyone.
Link to Nikkei article (in Japanese):
http://www.nikkei.co.jp/news/main/20071206AT2C0505005122007.html
In principle, this is the right thing to do - insider dealing must be punished. But, viewed from a broader perspective, this is yet another step in tightening the screws in financial regulation that has been under way in the recent years.
In my opinion, this is how the hardliners in FSA are trying to restrain investors from being active. Admittedly, they might have some reasons to believe this is a right thing to do. Say "shareholder activist", and the name you will hear in Japan is Yoshiaki Murakami - the one of the few who tried to assert more power for shareholders over the traditionally indifferent Japanese companies. He ended up convicted for insider dealing, and seemingly, this translated into FSA perception of shareholder activism as a whole - they are dirty scoundrels trying to bluntly pillage companies at the cost of social cohesion these companies have been providing for decades. So, the regulation was kept being tightened more and more, the message to investors being - 'you don't need to think, the regulators will protect your interests'.
Is this how you achieve efficient financial markets and maximize shareholder benefits? Hardly.
One thing to look at is how attractive are Japan's borses to outsiders. The tightening regulation made many foreign companies looking for listing in Asia to consider Hong Kong and Singapore - markets far inferior to Tokyo in their size.
I believe the regulators should focus on investors education, rather than making life more difficult for everyone.
Link to Nikkei article (in Japanese):
http://www.nikkei.co.jp/news/main/20071206AT2C0505005122007.html
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