Entering a year of intensifying scrutiny on illegal tips on Wall Street amid implementation of the Dodd-Frank financial reform law, the U.S. Securities and Exchange Commission has scheduled its annual compliance outreach seminar Jan. 31.
The free webinar is intended to help chief compliance officers and other business leaders minimize the odds of employees sharing or benefiting from insider trades following tips.
In the past few years, U.S. and New York prosecutors have zeroed in on so-called expert networks, essentially rings in which well-placed executives share tips that get disbursed to a wider range of traders.
In sentencing a California hedge fund consultant last month, U.S. District Judge Jed Rakoff said insider trading appears to be on the rise despite jail terms and monetary fines for perpetrators. Raj Rajaratnam, who was convicted of leading the largest-ever insider trading ring via his Galleon Group hedge fund, began serving an 11-year prison sentence in a Massachusetts federal prison.
Authorities are catching up. In December, a Bloomberg News report detailed a federal probe called “Perfect Hedge,” a reference to investigators”™ term for hedge fund managers receiving advance information on moves that swing markets, allowing them to buy or sell securities and maximize profits.
Multiple people who live in Fairfield County or worked for companies here have received jail terms for profiting on insider tips.
In July, a judge froze the assets of three Swiss companies after they bought more than a million shares of Norwalk-based Arch Chemicals Inc. on the eve of an announcement the company would be acquired by Lonza Group Ltd., which is based in Switzerland.
The smallest money managers today are spending 8 percent of their budget on compliance, according to a March 2010 survey co-sponsored by Greenwich-based Financial Tracking Technologies L.L.C. and the compliance trade news publisher IA Watch, with the average cost at 6 percent across all companies.
Greenwich-based Financial Tracking Technologies (FTT) is among the companies that sell software designed to raise the red flag on insider trading.
Founded in 1999 by Anthony Turner, FTT sells a software module that tracks news and other publicly disclosed information on companies, then analyzes trades made by an employee to see if they occur prior to the news going public.
By allowing companies to proactively address such scenarios and take action, FTT says it can help companies hedge their exposure to illicit trading activity.
Government regulators number among FTT”™s customer base, according to the company, as well as a third of the largest publicly traded money managers and insurers.
FTT has numerous other software modules, including those to track portfolio pumping, account dumping, and money laundering; and one allowing companies to track “pay to play” schemes involving political contributions by their employees.
