Banning the Exploitation of Confidential Information in Financial Market Transactions: A Study Under Kuwaiti Law and Comparative Law (Part 1)
Dr. Mansour Al-Saeed
Associate Professor of Commercial Law – Department of Law – College of Business Studies – PAAET – Kuwait
Dr. Adel Al Mayyas
Assistant Professor of Commercial Law – Department of Law – College of Business Studies – PAAET – Kuwait
Disclosure of financial and non-financial matters is one of the main pillars of corporate governance that will affect the efficiency and balance of markets, and achieve justice and protection for investors and stakeholders. This supports the economy and supports the investment climate. Although the commitment to disclosure is considered one of the most effective factors in achieving the success of the stock market and the stability of transactions, this commitment should not be understood in absolute terms. There are certain confidential information, whether in relation to the company or the market participants, that should not be disclosed in a manner that would harm them and thus negatively affects the market.
Accordingly, this study deals with a very important issue, which is the prohibition of exploiting information in financial market transactions. The exploitation of this information – whether commercial, technical or financial – has a positive or negative impact on the price of the security issued by the company. The research aims to define the scope of confidential information by defining it, explaining its characteristics and forms, and identifying insiders who are prohibited from exploiting this confidential information. The research also aims to identify the criminal and civil responsibilities that result from the insider’s exploitation of confidential information, and the power of capital markets to combat this phenomenon, in addition to identifying the extent of the efficiency of legislation and rules regulating capital markets in limiting the phenomenon of exploiting confidential information.
In order to examine the provisions regulating the prohibition of the exploitation of confidential information for companies dealing in the stock market, we divided the study into two chapters. The first chapter deals with the scope of the prohibition of the exploitation of confidential information, while the second focuses on the responsibility for breaching the prohibition of confidential information. The study concluded that all comparative legislation prohibits trading on the basis of confidential information that has not been published to the public if it has the capacity to influence the market price, given that the trading conducted by insiders will grant them an advantage over other traders. The is due to several reasons, the most important of which is that it violates the principle of equality between investors. Hence, the aim is to protect others who trade in good faith as well as protecting the stock market and instill confidence and reassurance among traders. The comparative legislation has shown the objective scope of prohibiting confidential information, as well as the identification of persons who have access to inside information (insiders).
Keywords: confidential information, insider misdemeanor, information exploitation, insider, corporate governance.