Rational man does not, in the aggregate, refrain from crime because he has been taught that it is Not a Very Nice Thing to do. He refrains because the chances of getting caught outweigh the risk.

Much confusion surrounds this simple hypothesis; and some of it seeped into the UK’s Financial Services Authority’s Thematic review of controls over inside information relating to public takeovers published last week.

A well intentioned work best described as 'educative' it is full of best practice and policy; but it hardly adds bite to the UK’s insider trading legislation nor is it likely to improve its record in reducing the sum value of illegal trades. A sample quote:
"Ensure that staff are aware that insider dealing is a criminal offence (this could act as a deterrent to trading)." (page 11, bullet 4)
That a significant cause of serious insider dealing might be staff ignorant to the point of not knowing that stealing is generally frowned upon is a diagnosis Bob Woolmer’s pathologist might readily concur with. But the idea that UK plc has not been healing itself of the worst examples of the insider habit because of poor practices or lack of knowledge bears little scrutiny.

In the man-eat-man arena of markets the FSA plays at the margins with a document of this ilk, cooing and stroking the heads of all, seminar-style. It is greater regulatory confrontation with shady dealings, M&A related or not, that would not go amiss. And in this vein there is something to be said for the Mr G Khan approach of slaughtering or blinding all but one in the village; and dispatching the mono-eyed survivor down the road to the next settlement with the news.

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