In The News
Even if you merely pass on confidential corporate information and do not trade, you can still be accused and convicted of insider tipping. The guity verdict against a former Goldman Sachs director in June 2012 shows the seriousness of insider tipping and the way circumstantial evidence alone can be enough to win a guilty verdict for prosecutors.
Some observers believe that quiet routine patterns of insider tipping and trading may be more systemic on Wall Street than previously thought. The SEC is now under more pressure than ever to detect violations and consequently "is taking a strong stance against insider trading."
An ongoing federal investigation scours the prestigious securities firm Goldman Sachs over a rash of suspected and alleged insider tipping and trading.
This law-firm blog presents a pair of SEC cases involving unusual cirumstances. The first brings allegations of insider dealing in a buyback at a privately held company. The second case features a more typical insider-trading story but with an unusual turn of events: a polygraph test administered by the SEC.
For SEC actions against alleged insider trading, timing isn't always everything. While most insider-trading actions by the SEC are prompted by suspiciously well-timed stock-trading activity, timing alone is not enough to prove wrongdoing. The SEC must show that the trade was motivated by important confidential information and not just an honest intuition or a lucky guess. In one recent court case, the SEC lost because it could not demonstrate an inside connection in the defendant's trading decision.
"Getting a stock-market tip has always been a sort of all-American fantasy," the author observes, "and despite the risk of detection, the desire for an edge seems irresistible." Indeed, it can be a daily occurrence. The Financial Industry Regulatory Authority (FINRA) annually hands the SEC about 250 potential cases of insider trading, an average of one case every market day. The SEC and financial regulators have increasingly sophisticated means of detecting insider trading and, by extension, the illegal tipping that often prompts it.
The NASPP's executive director cites a recent case of insider trading involving the theft and abuse of nonpublic information about Disney's planned acquisition of Marvel Entertainment. Before the deal had been announced publicly, the defendant allegedly stole confidential information about it from the mobile phone of his girlfriend, who worked for Disney at the time. This example shows the importance of insider-trading education for all employees of a company, not just for the insiders and executives who regularly handle sensitive confidential information. Read the formal SEC complaint in the case.
Following the historic insider-trading conviction of Raj Rajaratnam, Bloomberg considered his giant global web of informants and its implications for the future, in both safeguarding confidential corporate information and prosecuting those who trade on it. In the words of one quoted expert, inside information is "not just in the hands of CEOs and CFOs anymore." Enforcement agencies must come to grips with "the recent democratization and globalization of what is allegedly inside information."
Time after time, insider-trading violators think they can't be caught (until they are).
The "expert networks" that some hedge funds and other financial institutions consult to make investment decisions are at the center of big recent insider-trading cases. This article explains what expert networks are, why scrutiny of them is increasing, and how interpretations differ on the so-called "mosaic theory" of information-gathering.
Insider-trading scandals through the ages, from 1792 to the present.
Adopting the playbook of the wars against drugs and terrorism, the SEC has begun using wiretaps, advanced software, and informants in a new crackdown on insider trading among executives and other high-ranking insiders who often know secret market-moving information.
The SEC's intensified search for insider trading includes enhanced scrutiny of Rule 10b5-1 trading plans.
In response to a growing number of egregious cases, the SEC is making insider trading investigations a priority.
A securities lawyer and legal compliance expert examines issues of the Martha Stewart case that may apply to executives who trade company stock. See this Q&A with Bruce Brumberg, producer of the Think Twice series.
The SEC detects, investigates, and prosecutes insider trading even when it involves just small sums of money. As detailed in this insider-trading litigation release, the SEC settled a case against a person who made a stock-trading profit of only $4,272.
The San Francisco Chronicle prints comment from producer Bruce Brumberg on the Martha Stewart/ImClone stock scandal; the article also praises the Think Twice series.