The Massachusetts Secretary of State issued a new regulation that would affect the ability of investment advisors to use expert networks. This was a direct result of Risk Reward Capital Management being based in Massachusetts. Since the management company was registered as an investment adviser in Massachusetts they are subject to examination and enforcement by … Read more »
Category: Insider Trading
Pillow Talk at Playboy Leads to Insider Trading
The headline was too hard to ignore. I suppose there must be some compliance lessons to be learned. But first, the facts: William A. Marovitz, who is married to former Playboy Enterprises Inc. Chief Executive Officer Christie Hefner, made $100,952 on the trades, according to an SEC complaint. The SEC alleges that on five occasions … Read more »
Who Caught Them? Compliance or the SEC?
The SEC announced they had obtained an emergency freeze against three Swiss-based traders under an allegation of insider trading. The SEC claims that Compania International Financiera S.A., Coudree Capital Gestion S.A., and Chartwell Asset Management Services purchased more than a million common shares of Arch Chemicals just prior to the announcement that it was going … Read more »
Insider Trading: A Dirty Business
One of the major tactics of hedge funds is to “arbitrage reality”, operating with a better understanding of a company and its stock price than other participants in the market. In a legitimate operation, that means lots of research. On the wrong side it means getting inside information about a company’s earnings, upcoming deals, and … Read more »
Raj is Guilty. Nobody Is Surprised.
If you read about the evidence, you can’t really be surprised that Raj Rajaratnam was found guilty of insider trading. That he was found guilty on all counts was mildly interesting, but not much. We may get some interesting new legal developments in insider trading law from the appellate decisions. But probably not. The case … Read more »
Lawyers and Insider Trading
Even smart people do dumb things. Lawyers presumably know the law, but still break it. That means they occasionally take some short term profits through insider trading and get caught red-handed. Everyone is focused on the Galleon Group insider trading trial happening in Manhattan, threatening to put Raj Rajaratnam in jail. That case is complicated … Read more »
Massachusetts Brings Charges Against a Hedge Fund
You need to worry about more than just the Securities and Exchange Commission when it comes to private fund fraud. State securities regulators generally have the ability to bring fraud charges. Case in point is the Massachusetts’ Secretary of the Commonwealth bringing charges against Risk Reward Capital Management, RRC Management, the RRC Bio Fund and … Read more »
Are ETFs Reportable Securities?
As a compliance officer for a registered investment adviser, you need to verify transactions where the account has a “reportable security” to make sure your employees are not violating your insider trading policy. That means checking you employees’ securities accounts at least quarterly. You’re compelled by Rule 204A-1 (b)(2) to do this for access persons. … Read more »
Don’t Lie to the Feds When Caught for Insider Trading
The “classical theory” of insider trading targets “a corporate insider’s breach of duty to shareholders with whom the insider transacts[, and the] misappropriation theory outlaws trading on the basis of nonpublic information by a corporate ‘outsider’ in breach of a duty owed not to a trading party, but to the source of the information.” See … Read more »
How to Get Caught Insider Trading
Purchase out of the money call options set to expire in two weeks, be an employee of the company acting as an adviser in the merger, not have any activity on that stock before, use an account in your name, exclusively use option when you have barely traded options in the account before, and quickly … Read more »