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JP Morgan's Insider Trading How-To On Wikileaks
An anonymous reader writes "In an internal JP Morgan document published recently, Wikileaks exposes JPM's efforts to circumvent insider trading regulations, enabling their wealthy clients to profit even when others are losing. The document reads like a how-to and explains how to take advantage of SEC Rule 10b5-1, which has long been considered ripe for abuse. Now this abuse is publicly documented and will be hard to ignore."
It may not be confidential information but it is however informative about the prevalence of the sort of abuse that goes on with investing. You can't tell me that you were aware of such a blatant tool designed to aid with insider trading. It may be technically legal, but 100% unethical. And even more so for an investment firm to prepare a "how-to for dummies." I'm not sure how aware the SEC is of this problem, but that may get wind of it now if you weren't aware of it before.
Absolute power corrupts absolutely. indymedia
Slashdot is about both "News for Nerds" and "Stuff that Matters", and the former is quite often explicitly something that doesn't matter in the grand scheme of things. If you want a link to technology, there's at least the mere fact it was on WikiLeaks, which is gaining quite a bit of traction as a place where people dish out the dirt.
Anyhow, I suspect this sort of document may become rather important to Slashdotters when they find that their retirement funds are wiped out by the stock market. In that sense, it's certainly "Stuff That Matters."
So please feel free to debate something else, like why the post subject keeps changing back to the default when you hit preview...
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You want the Casino (or a favored player) to be able to know what the next cards are before other people at the table?
If there are other Casinos around, nobody will want to play at your "Milton Friedman approved" Casino.
Who said the lawmakers missed anything?
I even doubt that Wikileaks made it public;
Please point us to other places this document can be found online.
I mean, they must have some kind of advertisement or at least a publicly available description of this service, no?
All documents on Wikileaks were distributed somewhere, I don't see what your point is.
There are shills on slashdot. Apparently, I'm one of them.
You're missing the point. The act of trading inherently gives away information -- the information enters the market through the trade records.
The fact that this is so is easy to determine from careful analysis of stock markets. Whether that makes insider trading any more or less ethical is left as an exercise for the reader...
The fundamental problem is that the SEC made trading on insider information illegal, they didn't make "not trading" on insider information illegal, and that should never be made illegal.
Consider it an act of "hacking the SEC".
Hacking goes way beyond computers - hacking people's minds, the legal system and the financial industry, is the big game for the real big hackers who think beyond smashing stacks and simple pretexting social engineering.
Circumventing the system - it's what nerds do.
--- Grow a pair, liberals... stop letting the Republicans bully you!
I'll agree that it's obvious, but not in the way you think. There's plenty of evidence that insider trading occurrs to at least a moderate degree, and not much evidence (as distinct from appeals to intuition) that it does more than minor harm to the market.
The reasons why someone is selling stock are actually far less interesting than the fact that they're selling it. People regularly look to trade records for information, and don't ask why the trades occurred. Yes, the people with inside info profit from it -- but the information gets out when they do so, even if all the details don't.
The amount of harm caused by this process is very unclear and a subject of much debate. I'm willing to believe it's non-zero (what can I say, the appeals to intuition work), but there's no evidence it's gigantic. And there's certainly no evidence of outside investors getting scared off by insider trading -- though there's plenty of evidence that they get scared off by bad management, as they should, but that's for other reasons. Pump and dump is a symptom of bad management...
As I said before, I'll leave the ethics of insider trading to others. But I'm far from convinced there's more than minor harm resulting from it.
May 2001 - that would be four months after George Bush, Jr., went into the White House. I am not surprised the SEC, now under the control of a the same administration which dismantled our nation's anti-terrorism apparatus as much as possible from January 2001 until September 10, 2001, would issue such a ruling to allow unethical behavior like this. Sort of follows from what the FCC does these days and the environment they created back then that allowed Enron to take so many people's money in its collapse. Someone here belongs in prison - it is time for a moment of accountability.
There is a huge body of academic work on the economic effects of insider trading. There are reasonable and convincing papers written by reputable economists on both sides of the issue.
I think the idea of protecting the health of institutions is an easier sell to people than saying, "Hey, that's unethical."
You're right, but what I think is interesting is that in my (perhaps minority) opinion, it's exactly the same thing. Ethics are a means to descibe things that while perhaps good for the individual in the immediate sense, are bad for the structures that same individual depends on -- thus they are bad for the individual indirectly.
People have got this wacky idea in their head that ethics is about altruism. Or that the ethics come from arbitrary religious rule and have no bearing on reality. But as far as I can tell, ethics are essentially secondary laws of the universe, loose but significant forms of cause and effect. Even if there was no punishment for stealing, if lots more people started stealing, our relatively comfortable society would collapse.
Anyways, just some thoughts on ethics that have been bouncing around my head recently.
Cheers.
Yeah. My brain is not working.
:).
Anyway point is if players think the Casino isn't fair and there are too many players cheating they might go elsewhere.
Yes I know a stockmarket isn't like a casino. The top stockmarkets don't operate for 24 hours all year
I would think that in general JP would have OTHER clients who are shareholders in the companies in question and so by facilitating a backdoor to insider trading they are unfairly enriching one client at the cost of another who happens to have insider information. This is exactly the situation that the insider trading regulations were written to eliminate.
There are 4 boxes to use in the defense of liberty: soap, ballot, jury, ammo. Use in that order. Starting now.
Openly legalizing insider trading using some obscure loophole may look cynical, but that's only another example of big money at work. This law gets fixed, they find another way.
This is JP Morgan we're talking about. They just bought out Bear Stearns for $2.00 per share when it was trading four days ago at $60. AND they managed to do it with the government guaranteeing their purchase through a 300 billion dollar bailout funded by tax payers. The whole shit-parade stinks from the ground up, and it was exactly this kind of dirty stunt JP Morgan pulled during the Great Depression which made them the giant they are today. It's not even a different company pulling the same tactics, making mountainous profit through the engine of deliberate market collapse. We've all heard this song before, we know how the story ends, and they don't even have the decency to use a different cast of characters. So yeah, when evidence of insider trading through loop-hole law surfaces, people are going to jump on the, "Corporate Executives are Bad" stereotype, and that's because those stereotypes didn't come from nowhere, and JP Morgan is the granddaddy of them all.
Is YOUR mortgage paid off? When the banks come to take your house away after the crash and you're living in a Hoover city like the ones springing up today in California, will you be nodding yessir to the fat man in the suit smirking at you from behind tinted glass? Or do believe that your job and lifestyle are somehow secure?
Newsflash: Everybody goes hungry during a real depression except a very small cadre of Bad Executives, and you don't get let into the executive's club simply by defending their evil tactics through these schoolyard debates.
-FL
It does not mean anything if they don't comment. Here are possible scenarios for JPMorgan when confronted with the document.
1) They don't comment, and people are saying, "this doesn't sound like very "ok" activity." Thus implied is that they are guilty.
2) They say it is not theirs. People will comment on how this is spin.
3) They say it is theirs, and as previously noted it's legal, yet people will say, "oh look how unethical JPMorgan is."
In each of the scenarios JPMorgan is dammed so they take the route of not saying anything which is simplest from a legal perspective...
"You can't make a race horse of a pig"
"No," said Samuel, "but you can make very fast pig"
Or 4) They say it is theirs, demonstrate that it is legal, and use it as advertising. "We can game the rules to get you more money on your investments!"
Not that many people care about ethics when presented when more money as the alternative - just look at corporations the world over who will circumvent and even break the law, calling it merely a cost of doing business.
"They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety."
This situation is no more unethical than Mercedes or Volvo building a "safer" automobile that is only available to those wealthy enough to afford it
It is not the same at all. When the insider takes advantage of this inside information, the money or advantage is not created out of thin air, it comes from the other investors that did not have that inside advantage. This is not paying more for something better like your car example. This is using information that others will not find out about until a future date.
The second problem is that it is JP Morgan's fiduciary duty to offer the best product available to its clients, including taking advantage of the specifics of SEC regulations,
Wrong again. I don't think JP Morgans only "clients" are only a few people with inside information. What about JP Morgans other clients? Help a few and screw over every other client they have? Not quite fiduciary duty.
Bad boys rape our young girls but Violet gives willingly.
If I may...
You had the energy to read the pdf three times, and you sound pretty sure that you found a problem in the current version of the Wikileak page, based on factual and verifiable information... that's the perfect oportunity to edit that article!
If you're not sure, "be bold" (a wikipedia guideline: http://en.wikipedia.org/wiki/Wikipedia:Be_bold): edit it anyway, but add some explanations to the discussion thread (actually, your slashdot post would be perfect for that).
Remember, a wiki is that cool thing were a spotted mistake is a corrected one!
Don't take my posts literally; it's just code to control my botnet.
You're right - just like private planes are out of the reach of most people, since the technology required to make a plane safe is so expensive. The rest of us have to fly commercial or drive. But I'd rather not fly in my own private plane that I got cheap because the manufacturer cut some corners. More importantly, if I did buy a private plane, I would assume that certain safety standards were met by virtue of the fact that it's even on the market.
Luckily, the technology required to make cars safe is not prohibitively expensive - I'm talking about basics like seatbelts, and basic control systems to make sure the engine doesn't overheat and explode. As a society, we decide what constitutes "safe", and we mandate that.
The reality is pretty close to what I was saying - the laws are very strict when it comes to safety, and when a technology that significantly reduces car-related deaths is introduced, and it's economically feasible, Congress typically mandates that it become standard.
By the way, where I'm standing, the poor *do* walk, ride bikes, or more likely, take the bus.