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“Insider Trading Is Rampant and Routine”

Posted by Larry Doyle on January 19, 2012 1:15 PM |

As much as Wall Street is the center of the financial services industry, it is really a simple business that revolves around people and information.

That basic reality makes this business so fascinating. The personalities, the pace, the flow of data, and ultimately the interaction between counterparties make everyday a fascinating experience.

In order for Wall Street to thrive, though, and for our markets and economy to prosper, there needs to be a premise and a pursuit of fair dealing on a level playing field.

In the thirty years in which I have been involved in the markets, I have never sensed until the last few years that a rapidly growing percentage of market participants question this premise of fair dealing and level playing field.

Should we be surprised? Certainly not. In the face of high frequency trading, regulatory capture, too big to fail, and other intended and unintended consequences of current practices and policies, so many people in our nation question the very integrity of Wall Street itself.

I find this truly regrettable because our nation needs a healthy Wall Street with a healthy regulatory system in order to inspire real investor confidence. We are a LONG way from that reality.

Where are we? Well, in light of the most recent arrests in an ongoing insider trading scandal on Wall Street, let’s navigate and see how the US Attorney in Manhattan characterizes the current state of the state on Wall Street.

In a recent article in the Financial Times, ‘Perfect Hedge’ for Wall Street Prosecutors, Preet Bharara:

said the case, which resulted in criminal insider trading charges against four hedge fund employees and guilty pleas by three analysts, shows that insider trading is “rampant and routine, and that this criminal behaviour was known, encouraged, and exploited by authority figures in several investment funds”.

Rampant and routine? Is that right? Are you in a hurry to venture into these waters?

This reality truly should not come as a surprise given the preponderance of evidence showing that our regulators are captured by the industry and that the equity exchanges themselves promote glorified front running under the current construct of high frequency trading.

Navigate accordingly!

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.


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