I don’t know whether to be happy or sad after reading this article about a Wall Street insider trading ring:
Earlier this year, the SEC asked at least 10 Wall Street firms to turn over stock-trading records for the last two weeks of September, seeking to determine whether they leaked details about big stock trades to favored clients.The government said yesterday that it broke one of the biggest insider-trading cases since the 1980s. According to the SEC, which brought a civil suit against 14 defendants, the scheme stretched over five years, included hundreds of tips and produced more than $15 million in illegal profits.
At a meeting at the Oyster Bar in New York’s Grand Central Station in 2001, Mitchel Guttenberg, an executive director in UBS’s equity-research department, and hedge-fund trader Erik Franklin hatched one of the schemes, the SEC claims.
Guttenberg, 41, offered to settle a $25,000 debt to Franklin, 39, by slipping him analyst ratings in advance, the agency said. To avoid getting caught, the men used disposable mobile phones to send each other coded messages, according to the SEC’s complaint.
Should I feel sad because it indicates widespread and pervasive fraud in the securities market?
Should I feel happy because it’s such small beer – a 25k debt, a total of $15 million for 14 people for 5 years of work – we’re talking just over 200k per anum per person, which doesn’t compare well with what I guess an executive director at a big name securities firm in New York makes, never mind the $10 billion per anum in fees these firms take in from hedge funds alone. But believe me, I’m not surprised people would risk so much for so little. But then I wouldn’t be surprised if the SEC didn’t add another zero to the take at a later date.
