The Regulation of Share Buybacks and Insider Dealing : A Comparative Analysis

Securities regulation must balance the dual objectives of mitigating market abuse and permitting issuers to manage their capital flexibly and efficiently. This paper examines this issue in the specific context of the regulation of share buybacks within the insider dealing framework in a comparative analysis of the regulatory frameworks in the UK, US, and Australia. Share buybacks are covered by a safe harbour under the Market Abuse Regulation, which was onshored into UK law by the European Union (Withdrawal) Act 2018. Under the safe harbour, issuers are exempt from the prohibition of insider trading and market manipulation where the buyback programme and trades are disclosed to the public, and comply with the prescribed objectives, conditions, and restrictions with respect to the timing, price, and volume of shares repurchased. This safe harbour, as derived from the Market Abuse Directive, has provided uniformity in the regulation of share repurchases amongst EU member-states. Share buybacks have, thus, been seen to be a legitimate market practice in the UK and EU. With this as a starting point, this paper examines whether the UK/EU approach towards the regulation of share buybacks within the insider dealing framework may serve as a potential model for reform in other common law jurisdictions with well-developed financial markets. It argues that the UK/EU safe harbour for share buybacks is underpinned by what the author terms the “semi-strong” parity of information approach, which mitigates the risks of such buybacks being carried out on the basis of inside information, and provides a sound basis on which potential reforms may be structured