Alerts

Government Ratchets Up Investigation Into Insider Trading Involving Expert Networks

December 17, 2010

The charges announced by the Department of Justice yesterday against four consultants and an employee of the expert-network firm Primary Global Research reflect yet another component of the government’s stepped-up efforts to uncover illegal insider trading by institutional Wall Street investors. Last month, the government issued broad subpoenas to numerous funds that may have used expert networks in conducting research about potential investments. Where the expanding investigation ends up may test the boundaries between trading on legitimate information-gathering by research analysts, whose job it is to hunt for crucial bits of information, and trading on the basis of material nonpublic information. Firms that use expert networks — and other paid research consultants — should carefully evaluate the use of these services and make sure they have in place the appropriate safeguards to prevent the misuse of material nonpublic information.