The approach to insider trading that the government is lately employing got an interesting test today.
The government has reportedly been going after networks of experts and outside consultants that it says provide hedge fund traders with non-public, proprietary information.
Well, this afternoon, shortly before it was officially announced that shares of Janus Capital Group would stop trading pending a company announcement, the shares took a nose dive on spiking trading volume. In other words, a bunch of people apparently had the non-public knowledge that something was happening at Janus before it was announced.
Where did this information come from? If you look at the chart, the shares spike downward right around 1:48. So was some nefarious tipster letting his friends know about the pending halt and announcement?
Not quite. It turns out that Bloomberg ran a headline on its terminals at 1:48 EST. The headline read: “Janus Says It Received Inquiry Calling For General Information.”
That information wasn’t publicly available to anyone who does not have a Bloomberg terminal. It wasn’t posted on Janus’s website. In fact, it took several minutes before it appeared in any place the general public has access to.
So is Bloomberg aiding insider trading? Of course not. It’s a journalistic enterprise whose right to report information is protected by the First Amendment. That’s true even if the information is ‘non-public’ and has obviously been leaked by an insider. And, although it’s less clearly spelled out in the constitution, the right to gate the information so that it is only available to subscribers is probably protected as well.
The question is: what’s the difference between what Bloomberg did on Janus today and what the expert networks and consultants are doing?
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