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Opinion

Regulation: Insider trading accusations fuel public’s lack of trust in bankers

Regulators’ clampdowns on financial malpractice may cause a retreat from market participation.

The recent insider trading allegations in the US and UK can only add more fuel to the fire of public opinion when it comes to financial institutions.

It’s understandable that the authorities are channelling their efforts into the crime – they want to show the public that they are clamping down on financial institution misdemeanours, and insider trading is quite frequent, and can be uncovered relatively simply by sifting through trading data.

In the scheme of things, profits for insider traders are pretty small. One case recently brought against a UBS investment banker and two others indicates that they made between them $1 million. Split three ways, one wonders why they bothered, but to an irate public, it’s just another example of bankers and their greed.

A poll of more than 1,000 adult US citizens in March by Selzer & Co revealed the obvious – 57% of those surveyed said they had an unfavourable view of Wall Street.

Bankers are thick-skinned, however, so let’s imagine they care little about their unpopularity. But there is more at stake here than simple mud-slinging.

The general public no longer trusts that their money will be safe in equity markets.

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