Insider trading cases can be big news, with stories that recount massive profits and corresponding loss of investor confidence in the integrity of the financial markets. But despite the aura of conspiratorial wrongdoing and financial complexity attached to insider trading crimes, the formula for preventing them at a company usually is right there in the existing code of conduct. Applying the directives of the code and building a culture of compliance can keep insider trading far outside the gates.
In Saturday’s Wall Street Journal, über-reporter Christopher Matthews (not the “Hardball” guy) reported that the U.S. Attorney’s Office for the Southern District of New York had successfully prosecuted 79 securities fraud cases. The latest conviction involved Mathew Martoma, a former SAC Capital Advisors LP fund manager, who used confidential information and secret tips about clinical trials of an Alzheimer’s disease drug to trade Wyeth and Elan Corp. shares. This information helped the SAC amass illegal profits by avoiding losses in the amount of $275 million. SAC Capital recently pleaded guilty to insider trading and paid penalties totaling $1.8 billon.
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