In a recent CNBC interview, billionaire investor Mark Cuban argued that Alibaba (NYSE:BABA) shouldn’t have been allowed to list in the US—citing the difficulty of enforcing US insider trading laws for companies that are based in a communist country like China.
“If someone calls up someone at Alibaba and says ‘OK, I’m this bigwig and oh by the way you can tell me what’s going on with Alibaba or let me tell you about the new gulag we just built in southern China.’ There’s no choice. What are they going to say, ‘No, I’m violating insider trading laws in the United States?’ They’re not going to.”
Apparently, Mr. Cuban has a good point. In spite of all the reforms, the Chinese Communist Party continues to remain the gatekeeper of every industry, deciding who will be in what business and for how long. That certainly makes it very likely that someone high up in the government trades favors for inside information with executives of publicly listed corporations.