Insider trading in France: regulatory framework, actors, investment behavior and measurement of undue profits.

Summary The recent academic literature only very rarely addresses the issue of the behavior, transactions and earnings underlying insider trading. Based on the decisions rendered by the Enforcement Committee of the Autorité des marchés financiers between 2001 and 2011, we identify insider trading that took place between 1999 and 2008 on listed shares in France, which led to the individuals concerned being implicated and possibly to an administrative sanction. The information collected, which concerns not only the professional status of the insiders, but also the number and amount of their transactions, the type of insider information used, the profits obtained, and any sanctions imposed, allows us to characterize empirically the typical profile of the insider and his behavior. The determinants of profits, the probability of sanctions and the amount of the financial fine are also tested econometrically. We then focus on concealment strategies, which, although they exist, seem to be not very effective. The determinants of the size of illegal transactions are also highlighted by means of an econometric estimation. Finally, in the perspective of a fair adequacy between the financial penalty and the gravity of the breach committed, we propose an evaluation of the methods used by market regulators in France, in the United States and in Italy to calculate the profits made by insiders. Although much more complex, the method used by the SEC provides identical results to those obtained using the AMF calculation tool. The latter is therefore the preferred method for evaluating undue profits, as it is usable in all circumstances, statistically just as robust and simpler to implement.