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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
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.
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.
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
One last thing:
Wikileaks implies that the slide saying "[we can] help insiders with the successful sale of restricted stock", is unethical and illegal. However, I believe that they are misunderstanding what the slide is saying: Rule 10b5 is a way for insiders who do NOT currently possess non-public information to legally sell/collar restricted stock. In other words, the SEC created a way for "innocent" restricted stockholders to liquidate and access some of the value in their portfolios, which JP Morgan is quite happy to help them do so.
If the SEC could ever prove that someone with insider information was abusing one of these plans, they would come down on them like a ton of bricks.
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.
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.