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Federal investigation confirms what already is clear: Markets aren’t transparent

A Wall Street Journal story about a major federal investigation into inside trading provides additional confirmation of what we have seen based on evidence provided by Wall Street insiders whom we represent in SEC whistleblower cases: The markets are not transparent, and those with access to non-public information often use that information for personal gain.

According to The Wall Street Journal’s story on Nov. 20, the feds have been conducting a three-year investigation into multiple insider trading rings that has uncovered “new ways non-public information is passed to traders through experts tied to specific industries or companies.”

The investigation has touched a number of companies, the Journal said, including: Primary Global Research LLC, Goldman Sachs Group Inc., Broadband Research LLC, First New York Securities LLC, Ziff Brothers, Jana Partners LLC, TPG-Axon Capital Management, Prudential Financial Inc.’s Jennison Associates asset-management unit, UBS AG’s UBS Financial Services Inc. unit, and Deutsche Bank AG.

Insider-trading charges are expected against consultants, investment bankers, hedge-fund and mutual-fund traders and analysts across the nation, the Journal says.

This looks like another instance where many of the very people who tell the layperson that the markets are rational and transparent are playing by completely different rules. They succeed – not because they are smarter, more quantitative or just plain lucky, but because they are cheating.

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