If insiders give orders to buy or sell via their stockbroker, – the broker will react to this and buy or sell the corresponding security himself and – as a rule, also advise some important customers to buy or sell. This signaling effect of insider transactions can, as empirical studies confirm, trigger unusual price movements for the respective security and – by selling other securities to procure the necessary liquidity – on the market as a whole. – Insiders can also place significant sell orders in the market through a stockbroker or a bank, causing the price of the corresponding security to fall. At another bank, the insider gives an appropriately designed buy order and thus secures an unjustified profit. Insider monitoring is therefore rightly given very high importance by the supervisory authorities (attached high importance). – See Insider Surveillance, Rebbes.
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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