Human behaviour can be explained by different disciplines such as psychology , anthropology ,but also by economics. Economic theory tell us that individuals pursue any activity up to the point when marginal benefits are equal marginal cost. This means nobody will carry out any action, without expecting to get a benefit much higher than its total cost. So, the expected benefits of privilege information must be compared with the cost of taking advantage from it. If these cost are rather low, then it is plausible to have information asymmetry.
It should be a golden rule for financial markets, that the cost of using privilege information of any kind, is higher than its benefits. This means strict laws with specific procedures to enforce the rights of those who depends upon information, which might be available with some delays allowing information asymmetry, coupled with strong institutions to deal with all the issues involves in its enforcement .
But how to deal with the privilege information for financial purposes anyway?. If the cost of using privilege information are defined ,what about the benefits? .After all, it is impossible to assume that information does have only cost for the decisions making process and no benefits. Well, it is a matter of technology.
Actually, firms have web page with different design ,services and strength .The on line communication ,is very useful when it comes to get from top to the bottom quickly, to get corrective action. Internal networks allows people to be in touch with each other, the rest of the firm community and external customers and investors .This is the key, because privilege information should become public information, as soon as it develops to get published on the corporate web page, so any one interested can take advantage from it. Any time a decision with implications for financial markets has been made, it should be publish on the web page as soon as it is possible. This way it would be possible to match the higher cost of using privilege information, with the expected higher benefits arising from it. In other words , the benefits arising from using privilege information by a lot of people simultaneously make it public, reduce the cost of using it to zero, and make the most of its benefits .
Therefore privilege information is inefficient for markets decisions, because concentrates its benefits among few people risking high cost. Alternatively, whether it gets public, information allows benefits to a lot of investors ,with almost zero cost.
But the issue of self regulation is still pending to be solve. Economics tools also allows us to understand the reason why self regulation is not feasible. Individual investors seeks their own interest when it come to make decisions, specially when it come to financial ones. The same for corporate business. Because of this characteristics of individual behaviour ,it is expected that the whole community might also get the aggregate benefits from such decisions(assuming they turn out to be correct) through charity, donations , investment and the like . Self regulation contradict this pattern ,as long as it deny the benefits of a better informed decisions to everybody ,specially while information is labelled as privilege. On the other hand, each one want anything on their own, which make harder to regulates individual behaviour.-
So, do not expect self regulation to be the proper guide for dealing with business information. It is a lot more efficient, a clear framework of rules to follow through, when it comes to such topics. What about Ethics standards?. It is an alternative ,but to be useful it requires the proper enforcement mechanism.