Security Analysis and Insider Trading
Security analysts gather and compile information, talk to corporate officers and other insiders, and issue recommendations to traders. Thus their activities may easily cross legal lines if they are not especially careful. The CFA Institute in its code of ethics states that analysts should make every effort to make all reports available to all the broker's clients on a timely basis. Analysts should never report material nonpublic information, except in an effort to make that information available to the general public. Nevertheless, analysts' reports may contain a variety of information that is "pieced together" without violating insider trading laws, under the Mosaic theory. This information may include non-material nonpublic information as well as material public information, which may increase in value when properly compiled and documented.
In May 2007, a bill entitled the "Stop Trading on Congressional Knowledge Act, or STOCK Act" was introduced that would hold congressional and federal employees liable for stock trades they made using information they gained through their jobs and also regulate analysts or "Political Intelligence" firms that research government activities. The bill has not passed.
Read more about this topic: Insider Trading
Famous quotes containing the words security, analysis and/or trading:
“Is a Bill of Rights a security for [religious liberty]? If there were but one sect in America, a Bill of Rights would be a small protection for liberty.... Freedom derives from a multiplicity of sects, which pervade America, and which is the best and only security for religious liberty in any society. For where there is such a variety of sects, there cannot be a majority of any one sect to oppress and persecute the rest.”
—James Madison (1751–1836)
“Analysis as an instrument of enlightenment and civilization is good, in so far as it shatters absurd convictions, acts as a solvent upon natural prejudices, and undermines authority; good, in other words, in that it sets free, refines, humanizes, makes slaves ripe for freedom. But it is bad, very bad, in so far as it stands in the way of action, cannot shape the vital forces, maims life at its roots. Analysis can be a very unappetizing affair, as much so as death.”
—Thomas Mann (1875–1955)
“His farm was “grounds,” and not a farm at all;
His house among the local sheds and shanties
Rose like a factor’s at a trading station.”
—Robert Frost (1874–1963)