Watch attorney Ron Geffner say that no matter the laws, insider trading will continue.
Some even think insider trading (buying or selling stocks or other securities with inside information that the public isn't privy to) should be legal. Watch a Fox Business guest advocate for the legalization of insider trading.
Federal investigators are gearing up to file charges against a wider array of insider-trading networks, some linked to the criminal case against billionaire hedge-fund manager Raj Rajaratnam that shook Wall Street last week, people familiar with the matter said.From the SEC:
The pending crackdown, based on at least two years of investigation, targets securities professionals including hedge- fund managers, lawyers and other Wall Street players, the people said, declining to be identified because the cases aren’t public. Some probes, like the one focused on Rajaratnam, rely on wiretaps. Others stem from a secret Securities and Exchange Commission data-mining project set up to pinpoint clusters of people who make similar well-timed stock investments. Bloomberg
“This complaint describes a web of fraud that has been unraveled,” said SEC Chairman Mary L. Schapiro.Insider trading difficult to prove:
“What we have uncovered in the trading activities of Raj Rajaratnam is that the secret of his success is not genius trading strategies. He is not the astute study of company fundamentals or marketplace trends that he is widely thought to be. Raj Rajaratnam is not a master of the universe, but rather a master of the rolodex,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “He cultivated a network of high-ranking corporate executives and insiders, and then tapped into this ring to obtain confidential details about quarterly earnings and takeover activity.”
But now some of Wall Street’s biggest hedge funds are watching nervously as prosecutors say that Raj Rajaratnam, a billionaire fund manager, went too far in this relentless quest for a trading edge.
On Friday, federal prosecutors charged Mr. Rajaratnam and five other people with insider trading — using information that they received illegally in an effort to make riskless profits on stocks. Prosecutors have said they are still investigating the case, and some defense lawyers who are not representing people already facing charges said Monday that they could not comment on the record because they may be retained soon.
Insider trading, however, can be difficult to prove, said Leslie R. Caldwell, the co-chief of the white-collar crime division at the law firm Morgan, Lewis & Bockius. The line between buying legitimate research, trading rumors and gossip, and illegally paying for market-moving information can be complicated.
“There are some obvious insider trading cases where people obviously have a duty, they’re obviously misappropriating information,” said Ms. Caldwell, the former chief of the task force that prosecuted the Enron cases. “In terms of money managers and other people, where the duty becomes a little less clear, the relationships become a little less clear, the motivations become a little less clear, it can become more and more challenging.” NYT
