Insider Trading: Likely on the Rise and Harder to Detect

At a recent New York City Bar gathering, U.S. Attorney for the Southern District of New York Preet Bharara said that not only is insider trading “rampant” and likely “on the rise,” but also, that identifying, probing, and prosecuting this securities fraud crime has become much harder. Bharara’s speech was titled “The Future of White Collar Enforcement: A Prosecutor’s View.”

Bharara noted that because of the “sheer volume” and “complexity” of stock trading, it is harder to identify when a specific transaction occurs because inside information was obtained. Also, such illicit trades, he said, are “subject to plausible deniability.”

Bharara said that similar reasons make it easy for “pre-textual trading,” which is used to foil enforcement efforts, to occur. Also, the high volume of information that is now available through tweets, Web sites, blogs, and feeds can make it easier for someone to claim that trades were based on information obtained from “reports somewhere” rather than from an insider. Bharara pointed out that blurred lines have developed between white-collar crimes and street crimes and that the globalization of crime has made it easier for offenders to hide their illegal gains. Meantime, it has become easier for fugitives to seek refuge abroad.

Bharara vowed that probing and prosecuting insider trading remains a priority for the Federal Bureau of Investigation, the Department of Justice, and the US Securities and Exchange Commission. He said his office will use every legal tool of investigation at its disposal even if it means obtaining the court’s authority to use wiretaps.

The Future of White Collar Enforcement: A Prosecutor’s View, New York City Bar, October 20, 2010 (PDF)

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