Saturday, November 20, 2010

Vast Insider Trading Probe; Stock Analyst Turns Down FBI "Offer" to Wear a Wire

Federal authorities, capping a three-year investigation, are preparing insider-trading charges that could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders and analysts across the nation, according to people familiar with the matter, reports WSJ based on inside-information known only by the government.

You see, the government can leak insider information to spin a story in a manner beneficial to them, but woe a stock trader trying to get an edge.

This investigation appears to have surfaced after an analyst , John Kinnucan, a principal at Broadband Research LLC in Portland, Ore., was approached by the FBI, who wanted to him to wear a wire. He declined and  notified the targets in an email:
Today two fresh faced eager beavers from the FBI showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information," the email said. "(They obviously have been recording my cell phone conversations for quite some time, with what motivation I have no idea.) We obviously beg to differ, so have therefore declined the young gentleman's gracious offer to wear a wire and therefore ensnare you in their devious web.
According to WSJ, the recipients of the email were traders at, among others: hedge-fund firms SAC Capital Advisors LP and Citadel Asset Management, and mutual-fund firms Janus Capital Group, Wellington Management Co. and MFS Investment Management.

It appears the SEC is attempting to stretch insider charges that is only was one  step away from opening the WSJ and trading on information you read in the paper. According to WSJ, some of the insider charges revolve around the use of "expert-network firms".

WSJ explains the outfits this way:

Expert-network firms hire current or former company employees, as well as doctors and other specialists, to be consultants to funds making investment decisions. More than a third of institutional investment-management firms use expert networks, according to a late-2009 survey by Integrity Research Associates LLC in New York.

The consultants typically earn several hundred dollars an hour for their services, which can include meetings or phone calls with traders to discuss developments in their company or industry. The expert-network companies say internal policies bar their consultants from disclosing confidential information.

1 comment:

  1. So someone is asked to narc for the FBI, but ends up narcing on the FBI instead. While the irony is delicious, it'll probably end up being "illegal".