Insider trading is seemingly rampant. It is not a victimless crime. Let's stamp it out now.
I'm always pleasing when criminals are caught. 99% of people are law-abiding citizens. It's the few crooks that spoil it for the rest of us.
For example, why do we install expensive security systems in our homes? Why do we pay high premiums for home contents insurance? Why do we lock all our doors and windows when we leave home to go to work?
Why do we have a sense of relief when we return from a two-week holiday and find our house has not been broken into? And why do people keep stealing my bicycles?
We've got those few crooks to blame. Wouldn't society be so much more a nicer place if crooks didn't exist?
Nasty People
It's wishful thinking, unfortunately. Nasty, inconsiderate, vindictive, violent and selfish people are part and parcel of society. I wish they would disappear, but unfortunately that's not going to happen.
The same goes for white collar crooks. These people have just as much disregard for the law as do the petty criminals who blight our communities.
Detention For 150 Years
The world of high finance has its fair share of crims. Bernie Madoff, purveyor of one giant ponzi scheme, is the highest profile undesirable of recent times. For relieving thousands of upstanding, respected citizens of their life savings and their mental health, he is currently spending 150 years in a USA penitentiary.
Those Americans know how to hand out a good prison sentence!
So it was with great interest I read about the arrest of US billionaire hedge fund manager Raj Rajaratnam and five other people on charges of insider trading. (Rajaratnam was identified this year by Forbes as the 559th richest person in the world, with a net worth of $1.3 billion.)
These people are alleged to have profited from insider trading to the tune of $20 million. Of course, only a court of law will determine their innocence of not. Still, from what the prosecution have released to date, through phone tapping, it seems they have strong evidence of some serious wrong-doing.
Radio Silence
According to the FT, here are the contents of some of the phone tapes…
"On Akamai or IBM, anything, be radio silent..."
"I swear to you in front of God…You put me in jail if you talk."
"I'm dead if this leaks. I really am…and my career is over."
I've got news for these people. If found guilty, not only will their careers be over, but they will likely endure a long period of incarceration to contemplate their disregard of the law.
How To End Your Life In Prison
Reports say Rajaratnam, 52, faces 13 fraud and conspiracy counts, many of which carry 20-year maximum sentences. He may not be staring at a Madoff-like 150 years, but just two non-concurrent maximum sentences would likely see his life end in prison.
These charges should send a strong message to inside traders. It is not a victimless crime. For the $20 million allegedly profited, other investors lost that same amount. These crimes deserve long jail sentences, both to punish the perpetrators, but also to deter would-be no-gooders.
Insider Trading In The UK
Insider trading is still going on today, and looks to be happening here in the UK. A simple search of recent trading statements shows just how frequently it appears to be happening…
23 September 2009
"The Board of Litcomp (LSE: LIN) notes the recent rise in the Company's share price and announces that the Company is in advanced discussions with a potential offeror regarding a possible offer for the Company at 33 pence per share in cash."
23 September 2009
"Provexis (LSE: PXS) notes the recent share price movement and announces that it is in discussions with certain institutional investors and high net worth individuals regarding a potential subscription of new ordinary shares…"
22 September 2009
"The Board of Sinclair Pharma (LSE: SPH) notes the recent movement in the Company's share price and announces that it is currently in discussions about a potential significant product acquisition."
In all the above cases, the share price had moved before the announcement to the stock exchange. Insider trading? Let us know in the comment boxes below how this could not be…
Stamp Out Insider Trading Now
Insider trading is a blight on the investment landscape. To level the playing field for us all, especially for private investors like you and I, we need more action.
Sending guilty parties to prison is a first step. Investigating statements like the above is another. Announcing a major crack-down on the despicable practise, complete with stiff penalties including life bans from the industry, is also required.
Insider trading must end. Stamp it out now.
More on the economy and the markets:
> If you're in the market for buying shares, consider opening an online broker account with The Motley Fool's Share Dealing Service. You can buy and sell shares in real time for a flat rate of just £10. Click here to find out how you can open an account for free today. There is no obligation to trade.
