#1 Attorney General Vows to Crack Down on ‘Insider Trading 2.0’
Posted: Thu Apr 17, 2014 5:54 pm
Well. This could be interesting.NY Times wrote:Asset managers aren’t the only ones who should worry about BlackRock’s settlement with the New York State attorney general.
As part of a continuing crackdown on what he referred to as “insider trading 2.0,” the attorney general, Eric T. Schneiderman, said he planned to investigate brokerage firms that might have provided early market-moving information to preferred clients.
“We’re looking at both sides,” Mr. Schneiderman said at a news conference in New York on Thursday. “We’re looking at folks who obtain information, and we’re looking at the analysts who provide the information.”
Mr. Schneiderman declined to identify specific analysts or firms that needed to be reined in.
The remarks came a day after his office reached an agreement with BlackRock, the world’s largest asset manager, to end the company’s practice of surveying Wall Street analysts for early clues on their opinions before those opinions became public. BlackRock did not have to pay a fine or penalty but did agree to pay $400,000 to cover the cost of the investigation.
BlackRock isn’t the only company to come under scrutiny from Mr. Schneiderman’s office. In July, Thomson Reuters yielded to pressure to stop selling the early release of a closely watched economic survey.
Analyst recommendations can easily sway the market, and their opinions are closely guarded. The attorney general’s office concluded that BlackRock tried to gain unfair competitive advantages by soliciting tips in advance of published reports.
Mr. Schneiderman said he thought that BlackRock’s survey program, conducted from March 2009 to January 2013, was the largest of its kind. In some cases, Mr. Schneiderman said, brokerage firms appeared to encourage their analysts to respond to BlackRock’s questions. In other cases, individuals appeared to decide on their own.
With more than $4.1 trillion under management, BlackRock was a “major customer” to the brokerage firms that participated in the surveys.
Mr. Schneiderman praised BlackRock for cooperating with his office’s investigation and said he hoped that other firms would follow suit.
“The critical element here, and what we want to try and encourage other firms to come forward and do with us, is to stop the practices,” he said.