My friend and coauthor Mark Ramseyer has posted a great new paper on how Japan regulates insider trading. Here's the abstract:
The U.S.-controlled occupation imposed on Japan in the late 1940s an American-style securities statute. The U.S. statute did not ban insider trading at the time, and neither did the new Japanese law. Not until the 1960s did U.S. prosecutors and judges start to criminalize insider trading. Their Japanese counterparts did not follow their lead, and as of the mid-1980s had left insider trading largely unpoliced.
In 1988, the Japanese Diet banned and criminalized insider trading. Rather than use a vague rule like 10b-5, it carefully specified which investors, which trades, and which contexts would trigger the ban. In 2004, it added an administrative surcharge regime.
Commentators in Japan ostensibly urged the Diet to adopt the bill because they hoped to restore investor confidence in the stock market. If the ban restored investor confidence, it did not show. Shortly after the ban took effect, the Japanese stock market collapsed.
Cite: Insider Trading Regulation in Japan (August 23, 2011). Harvard Law, Economics and Business Discussion Paper No. 705. Available at SSRN: http://ssrn.com/abstract=1915284
