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Insider Trading - news report
I'd be curious as to the comments of Black Unicorn and others on
that legal finding - it does appear to make things at least a bit better
in this area... including making it difficult to claim that insider
information shouldn't be transmitted on the Net. Incidentally, I find
AP's calling insider trading "fraud" rather biased.
-Allen
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> INSIDER TRADING NEVER WENT AWAY
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> Copyright © 1996 Nando.net
> Copyright © 1996 The Associated Press
> WASHINGTON (Sep 18, 1996 10:35 a.m. EDT) -- One of the most infamous
> acts in the financial fraudster's playbook, insider trading, remains
> at record levels, despite a decade of steady crackdowns by regulators.
[...]
> The SEC brought one of its more unusual insider trading cases on
> Monday, when it sued the unnamed account holders in a Swiss and
> Bahamian accounts with insider trading ahead of The Gillette Co.'s
> merger proposal for Duracell International.
[...]
> One disturbing development for regulators is a recent decision by the
> 8th U.S. Circuit Court of Appeals that struck down one of the SEC's
> main enforcement tools in insider trading cases.
> The court, which covers several Midwestern states, rejected the
> so-called "misappropriation theory" in insider trading cases, which is
> used to nab people trading on inside information who don't owe a
> fiduciary duty to the company's shareholders. The court also rejected
> an SEC rule used to snare insider trading in tender offers.
> The 8th Circuit decision came in August in a Justice Department case
> against Minneapolis attorney James H. O'Hagan, who was charged with
> insider trading during the 1988 takeover bid of Pillsbury Co. by Grand
> Metropolitan PLC. SEC General Counsel Richard Walker has asked the
> appeals court for a rehearing on the matter.
> While the 8th Circuit decision represents a setback for the SEC, the
> agency usually brings its cases in the New York and Chicago areas,
> where the federal courts acknowledge these insider trading rules.
> Regulators say these enforcement tools are important because insider
> trading follows few patterns. In an analysis of 35 cases brought in
> 1995 that solely dealt with insider trading, Gerlach said 20 involved
> trading ahead of mergers, three ahead of other positive corporate
> announcements and six ahead of bad corporate news.
> He described 16 of the cases as "classic insider trading" involving an
> executive, company director or employee who traded on confidential,
> market sensitive information or tipped friends about it. Among the
> remaining cases, four involved trading by securities brokers or other
> industry officials, four involved law firm employees and one, an
> employee at an outside accounting firm.
> Investigators at the Nasdaq Stock Market's market surveillance unit
> refer a significant number of insider trading cases to the SEC. Halley
> Milligan, who heads a team of nine insider trading investigators at
> Nasdaq, said the market has made 73 referrals on suspected insider
> trading to the SEC so far in 1996, which is on par with last year,
> when 107 cases were referred to the agency.
> Nasdaq, like major stock markets, uses sophisticated computer
> technology to sniff out illegal trading. The Nasdaq system is called
> SWAT, or Stock Watch Automatic Tracking, which scans news databases
> after detecting any unusual trading.
[...]
> Copyright © 1996 Nando.net