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Insider Trading

At the beginning of the year, I posted a blog about “Some Resolutions to Consider.”  

Second on my list of three was a reminder not to forget about Insider Trading.   I mentioned how Insider Trading was really the impetus of corporate compliance in a way…but it had somewhat fallen off the radar in terms of imminent training priorities for many corporate compliance programs.   As much as I would like to take credit for having such foresight, the bottom line was that there was quite a bit of buzz at the end of 2012, warning that we should expect to see Hedge Funds and Investment Firms come under close scrutiny.


What planet am I on?  Since when is insider trading legal … for anyone?

I, too, learned from 60 Minutes that there is apparently an insider trading loophole the size of Congress.  According to much of what I’ve read and heard, because U.S. Senators, Congressmen and Congresswomen have no “corporate responsibilities,” they are generally exempt from the rules that apply to you, me and the rest of the country.  And based on their roles and “true” responsibilities, they are, not surprisingly, often privy to information about specific companies and entire industries long before Joe Q. Public becomes aware of it.  Sadly, but also not a surprise, it appears that many members of Congress – on both sides of the aisle – then go on to personally profit from that knowledge.  Although the irony may go without saying, I’ll say it anyway:  it’s very disturbing that the very people who legislate and regulate, often in the wake of and purportedly to prevent malfeasance, turn around and exhibit the exact same behavior they wish to prevent in others.


Less than a month into the 2012 calendar year, we are already seeing signs that the federal government is continuing to take serious aim at insider trading and seeking to raise the stakes for those organizations and individuals who don’t believe the hype.


If you’ve scanned the U.S. business headlines over the past few weeks, you’ve probably noticed a growing trend in the compliance and ethics arena. And no, it surprisingly does not involve bribery or corruption. It instead involves insider trading, a corporate crime that seems to rear its ugly head at some of the world’s most recognizable organizations and that tends to involve high-ranking or noteworthy individuals. Among the most recent cases is the highly-publicized Galleon Group case involving Raj Rajaratnam, as well as the case against Matthew Kluger, a New York attorney who used his access to highly confidential information to tip an intermediary who made illegal trades resulting in over $32 million in profits.


Insider trading continues to be a significant priority for the SEC. The charges filed in two recent complex insider trading rings, including the highly publicized case against Galleon Management LP, include allegations that confidential earnings and other information from a number of well-known public companies was misused. Even the most sophisticated of companies can be vulnerable to the misuse of their nonpublic information. These cases serve as a important reminder to public companies of the importance of having -- and enforcing -- a robust insider trading compliance program and of taking prompt action to investigate any potential violations of that program.


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