Den of Thieves, James Stewart
A good case study for a new lesson...
Firstly- what is insider trading? Can you give some examples?
1. Just how easy it was (is?) To get away with insider trading.
2. Most seem to have been caught by greed, unable to limit their crimes to just a few mild wins that nobody would notice and be unable to generate any patterns from
3. The media, rather than law enforcement (via the SEC investigations which many involved seemed to laugh off), seemed to be able to score hits against the trade by writing up profiles of those involved and implying they had been exceptionally lucky...
4. Many were involved initially in arbitrage (buying the same product on one stock exchange and selling it on another for a higher price - they exploit market inefficiencies and in so doing bring the markets closer together - making the markers more efficient!)
5. If a stock price went up it sparked rumours that it would be the subject of a hostile takeover. This would spark a race between the major Wall Street firms to get the contract to manage the M&A defence. Often the insider traders would use their network of contacts to buy a companies stock, convincing their management a hostile big was on the way, and they would hire their firm to defend them - even on just a retainer basis and no actual takeover was forthcoming. They abused their positions to bully companies into hiring them on retainer.
6. Some companies (or individuals) would "park" their investments with other firms to hide the connection, before transferring the funds once the deal had gone through and that stock had taken off.
7. The book really picks up pace in the second half, following the investigation. The characters and inside trading webs developed in the first half of the book are unpicked and unraveled - seeing these men rapidly shift positions to work with authorities in exchange for lightened sentences is fascinating reading.
8. The centre piece to the SEC investigation was trader Ivan Boesky. He agreed to bargain with the SEC in exchange for a lesser sentence. He worked undercover for about a month, recording conversations but to little real benefit as everyone seemed to know something was up. Additionally, during this period Boesky had quietly sold off his stock positions - so when the SEC announced that they had him and the stock market crashed, as Boesky was seen as integral to the whole stock market - and with the ability to bring everyone down - the SEC were soon accused of letting Boesky conduct the greatest insider trade of his life - selling his own shares before his own SEC investigation was made public!