Federal Investigation Could Redefine 'Insider Trading'

Prosecutors survey legal 'gray area' in landmark probe
By Matt Cantor,  Newser Staff
Posted Nov 24, 2010 6:39 AM CST
Federal Investigation Could Redefine 'Insider Trading'
In this file photo of May 27, 2010, U.S. Attorney Preet Bharara, who is leading the current probe, speaks to reporters during a news conference in New York.   (AP Photo/Seth Wenig, File)

(Newser) – Insider trading just isn’t what it used to be. As the feds mount a massive probe into the practice, its definition is becoming murkier: Where insider-traders of old simply whispered secret tips over the phone, today a wide range of data-gathering practices may be legally questionable, the AP reports. The online financial world provides information speedily and subtly, while “expert networks” carry information between corporations and investors about the firms’ activities.

With so much information online, traders can claim they got their facts from “some report somewhere,” says the leading prosecutor in the probe. Meanwhile, corporations are coming up with unusual ways to predict market movements—traders, for example, paid Chinese workers to count the trucks leaving a firm’s warehouse as a guide to future company sales. The question is, what’s insider trading, and what is, as a consultant says, “just smart data gathering”?
(Read more insider trading stories.)

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