by Kyle Colona on March 5, 2012
Despite the ongoing insider trading probe sweeping through the hedge fund sector and the recently released public service announcement featuring Wall Street cinema player Michael Douglas in his anti-hero role of Gordon Gekko who notoriously said that, “greed, for lack of a better word, is good,” hedge funds are said to have an edge in the mosaic of the expert-network of information that is relied upon by fund managers to make their wily moves.
And who was it that said “leave the gun, take the cannoli?”
Be that as it may federal prosecutors have convicted 57 individuals of insider-trading offenses thus far and are said to have another 120 more “actively building cases,” says the FiscalTimes.com. As it has been widely reported the federal authorities’ case being spearheaded by Manhattan DA Preet Bharara started by nailing Galleon Group founder Raj Rajaratnam and the high rolling Rajat Gupta may be the next domino to roll over.
The FiscalTimes expose notes that “Galleon Group generated its returns by bribing or coercing its employees” and others into coughing up info to Mr. Rajaratnam on companies such as AMD (AMD) and Polycom (PLCM). And at the heart of the case are secretly recorded tapes of phone conversations case that marks the first time the government has relied on such tactics in its hunt for insider tipsters whereas such plays were previously used to bring down organized gangsters with or without the cannoli.
In any event, the high flying hedge fund players still have an edge because there are too many players still standing who are “scrambling for some kind of edge. Moreover the hedge find market “doesn’t lend itself to simple due diligence on the part of its investors.”
Ultimately, large funds still rely on an “information edge” or insight when trading large-cap stocks, and people working in these shops are often “tempted to push the envelope out of fear of losing their jobs” when some fat cat “hollers at them for failing to come with a great, profitable new idea.”
At the end of the day the question remains whether the “Feds will accomplish what ethics, morals and sheer common sense haven’t managed to do: force wannabe Gordon Gekkos to think twice before crossing the line” or if Dylan may have been right when he long ago sang, “don’t think twice it’s alright?”
Kyle Colona is a New York based freelance writer and a Feature Writer for the Compliance Exchange and Wall Street Job Report. He has an extensive background in legal and regulatory affairs in the financial services sector and his work has appeared in a variety of print and on-line publications.