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Insider Trading at the SEC??

Posted by Larry Doyle on March 5, 2014 4:07 AM |

The abbreviated definition of insider trading is “the buying or selling of a security by someone who has access to material, nonpublic information about the security.”

Who could possibly be more “inside” than an individual who is in the position to take action against a company, that is employees of the Securities and Exchange Commission?

In another edition of “You Can Not Make This Stuff Up,” a recent paper highlights how employees at the SEC are superb in terms of their stock trading and specifically their stock selling skills. Let’s navigate.

. . . results suggest that SEC employees potentially trade profitably under the new rules, and that at least some of their profits potentially stem from trading ahead of costly SEC sanctions and on privileged non-public information. In short, it appears that SEC employees continue to take advantage of non-public information to trade profitably in stocks under their regulatory purview.

Think the recently convicted SAC trader Matthew Martoma might have liked the cover provided by SEC rules allowing employees to liquidate positions prior to a potential action being brought against a company?

When confronted by the findings in this paper, SEC officials were initially mute prior to releasing the following statement as highlighted by The Washington Post:

“Each of the transactions was individually reviewed and approved in advance by the Ethics office,” said John Nester, spokesperson for the SEC. “Most of the sales were required by SEC policy. Staff had no choice. They were required to sell.”

The requirement is based on the premise that an SEC official cannot work on a case while owning stock in the company in question.

In my opinion, that rule does not come anywhere close to passing the smell test. Employees primarily within the SEC’s Enforcement Division should either liquidate all individual stock holdings upon time of employment and/or freeze all holdings and trading of stocks until time of departure.

In regard to the SEC’s Ethics Office, is that an oxymoron?

Not to impugn everybody within the SEC, but the question of ethics within this commission should not be answered by an SEC spokesperson but by the many whistleblowers who have been violated in the past by the SEC (Peter Scannell, Gary Aguirre, David Weber, Peter Sivere, et al) and those who are still wondering what is going on with their cases and receiving what is commonly referred to as ‘the silent treatment.

Navigate accordingly.

Larry Doyle

Please order a hard copy or Kindle version of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy.

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The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Virginia51

    If we had an honest government and judiciary – they all would be required to liquidate their investments during their term in office. And there would be laws that would incriminate anyone in government positions (state and federal) for passing along insider information.

  • Peter Sivere

    SEC OIG Report dated March 3, 2009 – Five years ago.

    http://pogoarchives.org/m/fo/sec-oig-report-20090303.pdf

  • David P. Weber

    LD and all: There are common sense rules that work. When I was at FDIC and OCC, were were precluded from ownership and trading of ALL commercial bank stocks, period. We were also precluded from having a loan from a national bank (when at the OCC) or a state bank (when at the FDIC). It really is not that complicated. Unless you are an SEC employee, I guess.






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