Comments on: The SEC’s weird newswire investigation http://blogs.reuters.com/felix-salmon/2013/01/31/the-secs-weird-newswire-investigation/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: realist50 http://blogs.reuters.com/felix-salmon/2013/01/31/the-secs-weird-newswire-investigation/comment-page-1/#comment-45727 Thu, 31 Jan 2013 20:15:48 +0000 https://blogs.reuters.com/felix-salmon/?p=20356#comment-45727 I agree with Steve Hamlin’s point, especially since this particular embargo system “grew partly out of a 1905 scandal in which traders obtained confidential cotton-crop estimates”.

It also sounds like the FBI drove the investigation more than the SEC, I suspect because the embargoes in question are with departments of the federal government. Hypothesizing about the motives for the leak, my take is a combination of CYA (“we’re aware of this and being thorough”) and a not so subtle warning to Bloomberg, Reuters, and Dow Jones that they better toe the line.

Imagine the uproar if it did emerge that a few selected organizations were routinely gaming the embargo system to provide government economic reports to their data feed subscribers before the general release – even by a few seconds. I can write the summary of the Gretchen Morgenson column or Jesse Eisinger article: “All taxpayers fund the Labor Department to gather statistics about the U.S. economy. Hedge funds and investment banks then pay data providers for early access to get an edge over small investors.”

]]>
By: SteveHamlin http://blogs.reuters.com/felix-salmon/2013/01/31/the-secs-weird-newswire-investigation/comment-page-1/#comment-45723 Thu, 31 Jan 2013 15:22:15 +0000 https://blogs.reuters.com/felix-salmon/?p=20356#comment-45723 “An embargo is an agreement between a news source and a journalist; it’s not something to be enforced by the SEC.”

You need to dig deeper into insider-trading law, Felix.

An embargo agreement between a source and journalistic organization might create a duty on the journalistic organization to not leak or profit from that information contrary to the embargo agreement. If that information is, in fact, MNPI, and the journalists sell that information to third parties in violation (even for 2 seconds) of the duties created by that embargo agreement, that a lot of courts would call that insider trading.

I don’t think it’s as simple as you think it is.

See: https://en.wikipedia.org/wiki/Insider_tr ading#Misappropriation_theory , and United States v. Carpenter, where a journalist was convicted of insider trading for profiting on information he received for a column he wrote, even though he wasn’t an insider at the company in question, and had no direct fiduciary or other duties to the company in question.

]]>