There was a time when insider trading was limited to securities professionals with superior access to information. Then along came the employees in financial printing firms, who has superior access to information regarding tender offers and hostile takeovers. And then it became a thing with loading dock workers, NYC taxi drivers, pizza shop owners, computer repair techs and just about everyone.
Then the SEC cracked down, and at least from my perspective it got quiet. We would see an occasional investigation of a technical analyst who followed a handful of stocks for years and hit it big on two, and others who have been lucky over the years.
But lately, the cases are on the upswing. Recent cases have included traditional insiders - corporate officers andthe occasional attorney - but also hedge fund managers, scientists, and computer hackers. Check out the Insider Trading tag here at the Securities Law Blog for all of these stories on those who have been investigated and/or accused of trading on inside information. The question is, is the upswing the result of more insider trading, or is the SEC becoming more aggressive in investigating insider trading cases.
Of course, simply because the SEC charges someone with insider trading, that does not mean that the defendant actually broke the law. Like most government entities, the SEC is fond of attempting to expand its jurisdiction, and give itself more power. It therefore brings misguided cases on occasion, brought not for its regulatory agenda, but for a political and power agenda. The SEC's ongoing battle with Mark Cuban demonstrates the point. The SEC should lose that case, but it keeps on punching, filing appeals, and moving toward trial.
Others have noticed the trend as well. One commentator blames it on the regulations arguing that insider trading is governed by rules that are unclear at best and erratically enforced. He also points out that corporate executives, directors and other insiders blab all sorts of undisclosed material information to anyone who wants to know. Take a look at Steve Tobak's editorial at CBS News - Is insider trading still rampant?
And the cases continue. The SEC announced charges against a Hollywood movie producer along with his brother, cousin, and three others in his circle of friends and business partners for insider trading in the stock of a company for which he served on the board of directors.
The SEC alleges that Mohammed Mark Amin, prior to a company board meeting, learned confidential information about expanding business opportunities for DuPont Fabros Technology Inc., which develops and manages highly-specialized and secure facilities that maintain large computer servers for technology companies through long-term leases with them. Amin tipped his brother Robert Reza Amin, cousin Michael Mahmood Amin, and long-time friend and business manager Sam Saeed Pirnazar with nonpublic details about three new leases that DuPont Fabros was negotiating and three loans it was obtaining to develop new facilities. The three illegally traded on the basis of that inside information. Reza Amin went on to tip his friends and business associates Mary Coley and Ali Tashakori, who also illegally traded. Together they made more than $618,000 in insider trading profits when DuPont Fabros stock rose 36 percent after the company issued an earnings release highlighting the development of these new facilities.
The SEC says that they earned $618,000 in profits. They agreed to settle the Mark Amin and the five others agreed to settle the SEC’s charges by collectively paying nearly $2 million.
The SEC's Insider Trading Complaint is at the SEC's website.