How many insider trading cases in 2011

These tactics, normally used to fight organized crime and drug cartels, have helped prosecutors connect individual defendants to a broad network of insider trading, said John Coffee, a professor of securities law at Columbia University. The biggest win for the government so far was the conviction of Raj Rajaratnam , the founder of the now defunct hedge fund Galleon Group, who was found guilty last month on 14 counts of securities fraud and conspiracy.

The closely watched case featured recordings of phone conversations in which Rajaratnam and his sources blatantly discuss ways to profit from non-public information.

But there is growing speculation that federal investigators have set their sights on another big hedge fund, SAC Capital, although no charges have been announced. The Wall Street Journal reported last week that SAC is the subject of an investigation by the Securities and Exchange Commission into suspicious trades related to a merger in the health-care industry. In October , the Justice Department charged Raj Rajaratnam, a New York hedge fund manager, with fourteen counts of securities fraud and conspiracy.

Rajaratnam, who was found guilty on all fourteen counts on May 11, , had allegedly cultivated a network of executives at, among others, Intel, McKinsey, IBM, and Goldman Sachs. These insiders provided him with material nonpublic information. Raj Rajaratnam was the 35 th person to be convicted of insider trading of 47 people charged since Insider trading may be defined as any form of trading based on nonpublic information relevant for the fundamental value of a company and thus the stock price.

Section 10b of the Securities and Exchange Act of governs U. The concept identifies something an action that we are required, or bound, to do. Many people feel that morality is fundamentally a matter of duties a Christian, for example, may feel that living a moral life amounts to dutiful adherence to the The Directive excludes primary and secondary insiders to engage in trading based on inside information, disclosing the information to third parties, and recommending a transaction to a third party.

Several academics, including Milton Friedman, have argued that insider trading ought to be legal. We will use the Rajaratnam case, specifically the instance of alleged insider trading on September 23 and 24, , to examine these four claims made by proponents of legalizing insider trading:. This is an empty argument that does not address the ethics of insider trading and could be used to justify any unethical behavior. Recent empirical evidence demolishes this argument.

Let us consider the imaginary case of Jane Smith, an investor in Goldman Sachs stock who puts in a sell order for shares of Goldman Sachs three minutes before closing time on September 23, Had Rajaratnam not bought those shares, then Jane would have sold her hundred shares for a substantially higher price the next morning. Most basically, and uncontroversially, it involves bodily injury.

By Jonathan Stempel , Katya Wachtel. Reuters - Hedge fund titan Steven A. But it does not end the scrutiny as the U. The law contains a key provision, Section 10, broadly outlawing certain forms of stock fraud. Based on Section 10, the Securities and Exchange Commission in adopted Rule 10b-5 , making the fraud provisions applicable to purchases as well as sales of securities. Section 10 and Rule 10b-5 became the key provisions to prosecute illegal insider trading. Neither provision actually defines insider trading.

Acting on a tip that the Texas Gulf Sulphur Company had discovered a site near Timmins, Ontario, rich with copper ore, company officials traded heavily in the stock before disclosing the find. The officials were sued by the Securities and Exchange Commission and by shareholders, who contended that the executives had traded on inside information.

The United States Court of Appeals for the Second Circuit in New York ruled that anyone who possessed inside information of a consequential nature must either disclose it to all of the investing public or abstain from trading until that information was public.

Texas Gulf Aides Lose in S. Case Aug. In , the S. Chiarella, a printer at Pandick Press, had pieced together the names of corporate targets from confidential documents and then traded on that information. A federal court convicted Mr.

Chiarella of 17 counts of securities fraud and sentenced him to one year in prison. The Supreme Court said there must be a confidential relationship, or fiduciary duty, between any defendant and someone else for there to be a violation of the securities law. The Supreme Court rules that Raymond Dirks, a financial analyst, did not commit illegal insider trading by telling clients to sell their stock in Equity Funding.

Dirks had uncovered a huge fraud in Rather than make his discovery public, he told clients to get rid of their stock in the company. Ivan F. Boesky, the former stock speculator, agreed to settle insider trading charges and provide evidence about other wrongdoing on Wall Street.

Boesky was a specialist in risk arbitrage, where stocks are bought in anticipation of a takeover, a merger or change in corporate ownership.

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