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WSJ: Expert Networks = Insider Trading

Posted By Barry Ritholtz On November 22, 2010 @ 6:00 am In Analysts,Legal,M&A | Comments Disabled

The WSJ occasionally buries huge stories in its much less read weekend edition; recall the option backdating [1] investigation in 2006.

This past weekend was a classic example [2] of this:

“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.

The criminal and civil probes, which authorities say could eclipse the impact on the financial industry of any previous such investigation, are examining whether multiple insider-trading rings reaped illegal profits totaling tens of millions of dollars, the people say. Some charges could be brought before year-end, they say.

The investigations, if they bear fruit, have the potential to expose a culture of pervasive insider trading in U.S. financial markets, including new ways non-public information is passed to traders through experts tied to specific industries or companies, federal authorities say.”

The criminal investigation was examining how nonpublic information was being passed to traders by consultants. These people work for companies that provide “expert network” services to hedge funds.

• Primary Global Research LLC, a Mountain View, California, firm
• Goldman Sachs Group Inc. bankers
• Broadband Research LLC in Portland, Ore

There is a laundry list of potential targets for SEC violations. Trading firms possibly under investigation include SAC, First New York Securities, Wellington, MFS, Janus,  Citadel, Ziff Brothers, Jana, TPG-Axon, Jennison, UBS and Deutsche Bank.

Companies whose stock trading were under review include Schering-Plough (before its takeover by Merck), MedImmune’s takeover by AstraZeneca, Abbott Laboratories take over of Advanced Medical Optics.

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Source:
U.S. in Vast Insider Trading Probe [2]
SUSAN PULLIAM, MICHAEL ROTHFELD,JENNY STRASBURG and GREGORY ZUCKERMAN
WSJ, NOVEMBER 20, 2010
http://online.wsj.com/article/SB10001424052748704170404575624831742191288.html


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2010/11/wsj-expert-networks-insider-trading/

URLs in this post:

[1] option backdating: http://www.ritholtz.com/blog/2006/03/ceo-options-luck-or-something-else/

[2] classic example: http://online.wsj.com/article/SB10001424052748704170404575624831742191288.html

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