  After the 2007/2008 financial crisis, the UK government decided that a change
in regulation was required to amend the poor control of financial markets. The
Financial Services Act 2012 was developed as a result in order to give more
control and authority to the regulators of financial markets. Thus, the
Financial Conduct Authority (FCA) succeeded the Financial Services Authority
(FSA). An area requiring an improvement in regulation was insider trading. Our
study examines the effectiveness of the FCA in its duty of regulating insider
trading through utilising the event study methodology to assess abnormal
returns in the run-up to the first announcement of mergers. Samples of abnormal
returns are examined on periods, under regulation either by the FSA or by the
FCA. Practically, stock price data on the London Stock Exchange from 2008-2012
and 2015-2019 is investigated. The results from this study determine that
abnormal returns are reduced after the implementation of the Financial Services
Act 2012; prices are also found to be noisier in the period before the 2012
Act. Insignificant abnormal returns are found in the run-up to the first
announcement of mergers in the 2015-2019 period. This concludes that the FCA is
efficient in regulating insider trading.
