Insider Trading Will Not Be Tolerated – You’ve Been Warned

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Criminal elements and unscrupulous investors are constantly searching for ways to make financial gains outside of ethical means. Insider trading is one such tactic attempted by such shady villains to reap huge profits in a short amount of time and escape with their ill-gotten gains undetected. Such insider trading attempts are not uncommon but they are both immoral and illegal. Some of these thieves apparently feel confident in pursuing this method of activity when hiding behind online resources and utilizing accounts based in less-visible countries they feel will not detect or prosecute their actions.

Case in Point – Brokers and Law Enforcement Working Together

A recent story in The Nassau Guardian reported in detail how such a group of unethical thieves extorted huge profits through insider trading using an account based in The Bahamas. The facts behind the story divulged how the participants used inside knowledge obtained by a J.P. Morgan analyst related to an acquisition of ExactTarget by tech company salesforce.com. By purchasing the stock prior to any public announcement of the acquisition the analyst and his partners in the crime were able to realize significant profits when the stock rose after the acquisition became common knowledge. They promptly sold the stock for considerable gains.

Fortunately these actions caught the attention of officials who investigated and made the appropriate arrests of those involved. The brokerage company Swiss America Securities, Ltd. (SAS) President Guy Gentile reported that the charges against the J.P. Morgan analyst and his associates for the insider trading SAS detected “should serve as a warning to those attempting to exploit the country’s financial services sector. The Bahamas is not the place to hide your criminal activity. It will be discovered, it will be reported, and it will be prosecuted.”  Gentile stated “Swiss America will not tolerate bad behavior and neither will The Bahamas. I’d like to thank the Securities Commission of The Bahamas, the Royal Bahamas Police Force, the United States Securities Commission, the FBI and especially my Chief Compliance Officer Philip Dorsett for properly handling the matter.”

These statements by Gentile reinforce the importance and desire of SAS and multiple legal and regulatory entities to work together to halt such activities.

Neither SAS nor The Bahamas will tolerate such improprieties or illegal activities that they become aware of. Such actions warrant immediate investigation and prosecution. Robert A, Cohen, acting co-chief of the SEC Enforcement Division Market Abuse Unit stated “We will continue to proactively identify and combat serial insider trading schemes, particularly when it involves industry professionals.”

Another Case of Notoriety

The New York Times has also recently reported on a case of insider trading that involves not only knowledge of insider information being compromised, but an elaborate scheme of combining computer hacking and insider information. Traders in the US are charged with sending computer hackers in the Ukraine the information they were particularly interested in gaining before it was made public. Their criminal cohorts in the Ukraine would then determine how to gain the information and pass instructions back to the US raiders to use in gaining the information they needed to make profitable trades based on such confidential information. In all nine people have been charged after gaining over $100 million through their illegal international scheme. Investigators again found that one of those involved in the activity was a hedge fund manager and former Morgan Stanley employee who had gained $17 million in illegal gains.

This particular combination of insider trading and computer hacking had been going on for five years before federal prosecutors and SEC regulators announced the arrests and indictments involving the perpetrators.  The companies whose computer systems were hacked to obtain the information were not charged with any wrong-doing and are cooperating fully with the investigation. In this instance tens of millions of dollars have fortunately been recovered from the accounts of those involved, along with seizure of some homes, a boat, and an apartment complex purchased with profits from the illegal activities.

This complex scheme was a more expansive approach to illegally profit from information than a similar plan uncovered a few years ago. In that case a group of Estonian hackers attacked the domain of Business Wire to gain access to advanced news release information. Information obtained through these intrusions into corporate information gave them the edge they needed to profit through making trades before the information went public.

In each of these cases regulatory agencies and law enforcement worked with the impacted companies to prosecute the perpetrators and recover damages to the extent possible. The lesson to be learned is that although criminals will continue to attempt to utilize insider information to make illegal stock trades, reputable brokers will work with all levels of investigators and regulators to bring such criminal elements to justice.

Reliability and Integrity are Key Attributes for Online Brokers

Selecting an online broker includes consideration of many factors among them:

  • Availability of online tools such as real-time stock tickers and analytical evaluations
  • Economical fee/commission structure with full disclosure of all applicable fees
  • Speed and accuracy of trade executions
  • Accessibility from desktop computers and mobile devices

When considering an online broker for your investing purposes you also must consider their reputation and business practices. Do your homework to ensure the broker you’re about to rely on for your financial transactions has the integrity you demand of a business you expect to become your long-term stock trading partner.

SureTrader is a leading online broker for day trading that can provide you with reliable and honest services for your online trading activities. SureTrader also offers consistent courteous support for your trades including fast order execution and mobile options for traders using both iOS and Android devices.

Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.

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