"It wasn't widely known that trading on secret information was wrong..."
Location: Blogs Bob O'Brien's Sanity Check Blog
Posted by: bobo 6/2/2006 7:06 AM
Here's a fun article from Thestreet.com, which discusses hedge funds who traded in advance of PIPE deals, in violation of insider trading rules and misappropriation.
thestreet.com
My favorite quote:
"They note that, until recently, it wasn't widely understood that it was wrong to short shares of a company while the transaction is still a secret."
Huh.
Yesssss. I seeee.
Who knew that trading on material non-public information was a no no? Why, if only these rules were set down somewhere these investing professionals could refer to......like a code, or something......
And it isn't like the underwriters contact the hedge funds and tell them they need to suspend all trading in the issue for a week while they get them the details, and have them sign an NDA pledging them to complete secrecy and no trading, or anything. I mean, it isn't like that is the STANDARD PRACTICE IN THE INDUSTRY!!!!
This typifies two things in my mind. First, the level of unbridled arrogance that some in the miscreant hedge fund community possess. They clearly believe that they can float the most pathetic of excuses for market manipulation, and that investors are stupid enough to buy whatever they cobble together.
Second, it highlights the sorts of abuses that are endemic to the genre. These guys will do whatever they feel like, and if caught, after the fact, "consider" a workout with the SEC.
Does anyone understand that there is a problem here?
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