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Insider Trading

14 Apr Insider Trading

There has been a lot of media coverage in the past few months about a Billionaire Hedge Fund Manager who was accused of making over $50 million in the stock market based on illegal stock tips. If you’re thinking of a scenario where your favorite uncle whispers you to come over and tells you that he heard about a secret from a friend of a friend’s brother who works at the company, and that a certain company was going to be bought out by a large corporation for a huge premium, and then your uncle suggests you to buy shares of the company before the news is announced. Well… this is called insider trading and it’s illegal. You and your favorite uncle could be spending some time behind bars. However, the big issue with this Billionaire Hedge Fund Manager, Raj Rajaratnam is he gained access to private, secretive information (not publicly available) about certain deals that were going to take place and he bought shares of these companies before the news was announced. Once these deals were announced, the prices of these companies skyrocketed in value and he profited immensely from it. You’re probably thinking that this isn’t fair… Well, of course it isn’t but the reality is somehow big money managers or big brokerage houses which invest their own money, have been doing this for a very long time. We’ll see how the insider trading trial of Raj Rajaratnam goes. If he’s guilty then at least, it somewhat evens the playing field for us little guys.

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