Joseph Blum


From near total destruction forty-one years ago, the Federal Republic of Germany has emerged as the fourth wealthiest industrialized nation. Yet despite this wealth, the German capital markets remain miniscule in comparison to those of other industrialized nations. This development has had a significantly adverse effect on the ability of German companies to raise equity capital. The aversion of individual Germans to invest in equity securities can be explained on a number of levels. First, many investors find that fixed-rate bonds and similar securities provide equal if not better yields than stocks, without the concomitant risk. Another significant reason that many small investors in Germany shy away from stock investments is the widely-held belief that the markets are, to some extent, "fixed;" in particular, that insiders and speculators retain a significant advantage over the common investor. The purpose of this Article is to explore the German approach to the regulation of insider trading.