Abstract:
The study on insider trading has increasingly shown that the unrestricted presence of illegal insiders is both harmful to investors and to the development of the market as a whole. The damage is reduced upon the enactment of laws designed to limit insider trading. However previous study and experience of other country shows that having only insider trading laws does not prevent the insider trading problems. Enforcement is the vital one for effective regulation of insider trading. The most effective laws in regulating insider trading is the laws that impose both civil and criminal sanction and applies both private and public enforcement. The researcher find that, Ethiopian security laws do not regulate the secondary insiders such as accidental insider, hackers , political insider and not recognize the private enforcement system and there is no civil sanction imposed on the insider trader in Ethiopian security laws and there is no specific agency for publication of inside information. So the researcher recommend that Ethiopian laws have to fill the gap/loopholes through giving broad definition to insider, proof of mental state must not depend on relationship and it should be based on the trading while in possession of UPSI to prohibit person trading on the basis of UPSI. There have to be specific agency for publication of UPSI and law should impose both civil sanction and criminal sanction as well as there have to be both public and private enforcement system to effectively detect the secretive nature of insider trading and to overcome difficulty on proof of insider trading crime and difficulty on enforcing insider trading laws
