CQF - Information Sessions & Free Sample Lectures

Post-it Note Eating Insider Trader Pleads Guilty

The middleman in a $5.6 million insider-trading scheme passed the illegal tips on post-it notes in Grand Central Station, and then ate the evidence, the SEC claims in court.

Sometimes he passed on the inside information in coffee shops.  There he wrote the tips on a napkin, which he destroyed, sometimes by eating it, the SEC said.

Hey, who needs computers and smart phones. Here's an example of insider trading the low-tech way! LOL!

Please read more on the Courthouse News Service

The "Stock Act" Allows Top Federal Employees To Trade on Inside Information



by Mark Gongloff

Huffington Post


Who says nothing ever gets done in Washington? Swiftly and without fanfare, Congress and President Obama have made it easier for top federal employees to trade on inside information.

On Monday, Obama signed into a law a change in the Stop Trading On Congressional Knowledge, or STOCK Act, which was passed in 2012. The change, which was approved unanimously by Congress last week, means that top federal employees, including staffers on Capital Hill and in the White House, will not have to publicly disclose their financial holdings online. That requirement was part of the original STOCK Act, but its implementation had been delayed again and again by Congress. And now it's dead.

The STOCK Act change does not apply to the president, vice president, members of Congress or candidates for Congress. Obama and Congress loudly passed the original STOCK Act last year after reports in the Wall Street Journal and elsewhere, along withacademic studies, noted that lawmakers with access to market-moving information were suspiciously lucky in the timing of their stock trades. One widely-cited estimate suggests congressional portfolios outperform the broader market by 12 percent annually, though there are reasons to doubt that figure.

The rationale for changing the law was that its disclosure requirements created a national security risk, according to a study ordered by Congress and completed by the National Academy of Public Administration. Federal employees' unions had objected to the law from the start, saying it could put federal staffers at risk.

Still, changing the law creates its own risks. Though the law's disclosure requirements still apply to members of Congress, staffers have been a big part of the insider trading problem all along. As the WSJ reported in 2010, many congressional staffers were actively trading in stocks of companies with business before Congress. And many of those staffers were working on legislation affecting those companies.

But it's not as if the original STOCK Act was likely to fully clamp down on insider trading anyway: It was loaded with loopholes, Yale professor Jonathan Macey noted in 2011.

"On closer examination, it appears that what Congress really wants is to keep making the big bucks that come from trading on inside information but to trick those outside of the Beltway into believing they are doing something about this corruption," Macey wrote.

They're still at it.

Ex-SAC Trader Sentenced to 9 Years in Prison for Insider Trading Scheme


by Matthew Goldstein


Mathew Martoma was sentenced to nine years in prison on Monday for carrying out one of the biggest insider trading schemes on record in 2008 when he was working as a portfolio manager at Steven A. Cohen’s former hedge fund, SAC Capital Advisors.

The sentence was in line with what the government was seeking. Prosecutors working for Preet Bharara, the United States attorney for the Southern District of New York, had asked for a prison term of eight years or more for Mr. Martoma, who was convicted in February by a federal jury in Manhattan. Mr. Martoma’s lawyers had simply asked Judge Paul G. Gardephe to show mercy and sentence him to a significantly shorter term.

In handing down the sentence, Judge Gardephe said, “The sums here are staggering and the size of the punishment must be sufficient to deter others.”

Mr. Martoma was also ordered to forfeit a $9.38 million bonus he earned while working at SAC in 2008.

Mr. Martoma was silent during the sentencing hearing. His wife, Rose, seated in the front row, could be seen wiping her eyes at times.

Hours before the sentencing hearing was scheduled to begin in a Lower Manhattan courtroom, Judge Gardephe indicated his thinking about Mr. Martoma’s sentence for making illegal trades in shares of two drug companies, Elan and Wyeth.

The judge said in a 25-page decision issued Monday morning that it was appropriate for him to consider all of the $275 million in profits and avoided losses made both by Mr. Martoma and his former boss. Judge Gardephe noted that while prosecutors did not name Mr. Cohen as a co-conspirator, the evidence at trial proved that Mr. Martoma “provided inside information to Cohen and this information was the basis for Mr. Cohen and SAC Capital’s subsequent trades in Elan and Wyeth securities.”

Please read more here.