I am not going to comment on the details of, or have no intention at all of commenting on the guilt or innocence of the accused in the insider trading case centred on Raj Rajaratnam. What I am interested in are the wider implications.
Before we get to that, one thing I will say is that I find the US authorities habit parading people accused (but not convicted) of non-violent offences in handcuffs deeply repulsive. Is Raj going to make a break for it or attack an FBI officer? The handcuffs perform no function other than to humiliate, and that amounts to punishment prior to trial.
In part there has been a change of mood. Regulators are being tougher all round. Although insider trading has always been illegal, it was often dealt with with civil charges or settlements. There have been many apologists for it, arguing that it was harmless, or even a market mechanism that helped set accurate prices (it is a requirement of strong form efficient markets.)
The case involves not just big names, but a lot of them. The investors include Galleon, New Castle (part of Bear Stearns, in turn owned by JP Morgan) and Intel Capital. Leaks are alleged to have came through McKinsey, IBM and Moodys. The trading was in Google, Akamai, AMD and Clearwire shares.
The size of the investigation, the use of wiretaps and the criminal charges are all indications that the authorities are pursuing insider traders much more actively than in the past. Expect to see a lot more charges being brought over the next year or so.
Note: I know Raj and one other Galleon fund manager but only slightly and only socially (I last met them two or three years ago, and that was after several years).
Comments
Mahishaimo, insider trading should be treated as a criminal offense, simply because it gives an unfair advantage to one single person - at the expense of others - based on who he / she knows. A slap on the wrist is probably not the best way to settle it.
Today's Sunday Times (Sri Lanka) and The Sunday Island has devoted much to Raj.
GraemeI agree that it should be treated as a criminal offence - although I think sentences are excessive (is it really worse than rape?) and that the people to blame are primarily those who leak rather than those who trade on other people's leaks.
On the other hand I can see the need for a deterrent.
What I am interested in is why this case has attracted a criminal prosecution when many others have not, as well as the sheer scope of the case, and what it signals.
I cannot see anything of value in the coverage in the Sir Lankan papers (as usual).
Mahisha"..those who leak rather than those who trade on other people’s leaks"... agree...
I guess the US authorities want to be seen doing "something" after all this sub-prime mess.
GraemeExactly. The law has not changed, but the authorities are no longer tolerant of it.
Now, if only we could get the same level of enforcement in Sri Lanka (unlikely) and the UK (possible).
Moneyterms Blog > More on the Raj Rajaratnam insider trading case[...] A few quick thoughts, following on from my previous post: [...]
MahishaWould be nice if Sri Lanka cracked down on both market manipulation, and insider trading - but I doubt it, given the "connected' nature of most individuals.