Jan. 15 --As insider trading techniques become more complex, enforcement officials have to step up their game with better surveillance and analysis to detect and punish it, a panel said Jan. 14 at a D.C. bar gathering.
The “new frontier of insider trading” involves non-equity based securities, Daniel M. Hawke, chief of the market abuse unit in the Securities and Exchange Commission's enforcement division, said.
Real-time electronic surveillance has improved the effectiveness of federal investigations into insider trading, he said.
Also on the panel were Samuel J. Draddy, head of the Financial Industry Regulatory Authority's insider trading surveillance unit, Larry P. Ellsworth, a partner at Jenner & Block LLP in Washington, Russell G. Ryan, a partner at King & Spalding LLP in Washington, and Donald C. Langevoort, a professor at Georgetown University Law Center.
Developments in real-time surveillance allow the agency to investigate cases without “surfacing” to the people being investigated. “The first time they learn there is an investigation is when agents are taking them into custody,” Hawke said.
Draddy said that FINRA also uses “highly sophisticated electronic surveillance system that tracks the markets” and sends the agency alerts on potential insider trading.
From there, regulators will “triage” the cases, he said, and many get forwarded to the SEC for further investigation.
Electronic means can “slice and dice” trading data and parse it, but ultimately human analysis is required to determine whether conduct is suspicious, Draddy said.
The broader data collection allows regulators to look at how particular traders have acted over time, Hawke said, rather than merely looking at individual transactions.
“In those close call cases,” he said, “our willingness to lose says much more about us than how many cases we win.”
It's “not a record I'm ashamed of,” he added.
To contact the reporter on this story: Rob Tricchinelli in Washington at email@example.com
To contact the editor responsible for this story: Phyllis Diamond at firstname.lastname@example.org
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)