Wednesday, January 08, 2014

"To Catch a Trader": PBS Frontline documentary about insider trading on Wall Street

PBS Frontline aired an interesting one-hour documentary “To Catch a Trader” about the DOJ’s “Operation Perfect Hedge” which nabbed 78 convictions for illegal insider trading, mostly associated with hedge funds, in the past few years.  The link is here.

“They make big money by paying big money for information.”
The documentary also covered the testimony from Steve Cohen of SAC Capital, particularly about Winifred Jiau from Primary Global Research, convicted in 2011; so this documentary is about recent cases.
The film explained the change in the nature of hedge funds since the 1990s, to emphasize sercuritization and products like credit default swaps, implicated in the 2008 financial crisis.
It also covered how insidious insider trading is, particularly when connected to short selling.  Does selling short after publication of a “rumor” constitute an ethical violation?  The Internet, even “trash talk” financial forums popular as early as around 1997, could be manipulated to drive a particular security down for short-sell profit taking. This problem may have been more noticeable even before social media changed the strategies people used for communicating online.
Insider trading became a topic du jour in the late 1980s, during the Reagan years, as hostile takeovers became rampant.  

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