Essay About Croatian Securities Market And Classified Information

Insider Trading In Croatia
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Main purpose of modern stock exchanges is to interconnect supply and demand
in the best possible way in order to ensure that all trading parties get same level
of information and fair game in the market. Still, even in the highly regulated
systems there are always players discovering loopholes helping them make more
profit.
Market abuse is more dominant on underdeveloped capital markets where there
is no suitable regulation and control. So is the croatian securities market a fertile
ground for different players: from powerful insiders that trade classified
information, to players that fix prices.
Lately, the croatian regulatory agency (HANFA) decided to rectify some of the
market irregularities. New rules of the game resulted with revoking licenses
from brokerage firms and brought substantial disorder among the brokers that
were used to do the business for a while their way.
Most common ways of market abuse were using classified information, price
manipulation, and spread of fake/untrue information.
Using classified information was the most widespread way of getting easy and
quick profits and was used mostly by companys executives (board of directors).
Classified information meant all the information about the companys business
that can influence its stock price (takeovers, mergers, financial statements,
analyst predictions, dividends payout, etc.) not presented in public.
Using such information the beneficiaries could make profits and disqualify the
other players that didnt have it. As is using classified information difficult to
detect directly, most often unusual happenings in the market (big price changes
and big trading volume differences) showed insight of possible information
misuse and abuse. Regulatory agency started investigation trying to verify the
facts and connections between information traders.
The securities market abuse law states that, depending on the case, the penalty
varies between the fine of minimum 100 daily wages, and 2 years of
imprisonment.
An example is one of the few cases where the leading croatian pharmaceutical
company Pliva thought it wasnt neccessary to inform the public about its
takeover by Actavis, that resulted by intense trading and price increase of its
stock. The investigation was pursued afterwards, and its director was criminally
convicted.
Another common way of classified information abuse is trading stocks at higher
prices. This is the favorite activity of the brokers and means buying stocks for