Sam, while I'm not a lawyer, I do try to keep current on situations where a firm downgrades a stock and then starts buying it after it drops. The securities laws, as far as I know, don't address this problem very well. It is not the same as insider trading, where a person is privy to information not available to the public, and then trades on that information.
But in recent years, there have been complaints charging fraud on the market. This is a relatively new idea--that an influential person or firm intentionally manipulates the stock price so as to take advantage of it for buying or selling. The only way that fraud on the market could be pursued would be in the form of a class action. And to prove it, one would probably have to show, for example, that after downgrading the stock, the firm started buying it for various accounts that it administers. This could be pretty difficult, particularly if the the firm that trades the stock is different from the firm making the recommendations.
It is very frustrating to see unsavory, unethical attempts to profit from these scams going unpunished because it is difficult to pursue a successful action. Maybe the best solution is to use tire irons on the person's knees.
Art |
