As if Raj Rajaratnam and all the people implicated in the Galleon insider trading case weren't enough, another shocking individual has been caught doing the dirty deed.
Donald Johnson, former managing director of the Nasdaq stock market (emphasis mine), has plead guilty to insider trading in U.S. federal court. Mr. Johnson made more than $755,000 (U.S.) in three years by working in a market intelligence unit that communicated with companies before they made market-moving public announcements.
In other words, he got the information shortly ahead of the public, and would then buy or sell stocks that were affected by the announcements. It's a very easy thing for someone in his position to do. For instance, if there is an equity financing on the back of an M&A trade here in Canada, TSX Regulation Services is notified just ahead of time.
Mr. Johnson now faces up to 20 years in prison. But his case alone isn't what's so shocking -- it's the extent to which insider trading has picked up in the U.S. Or maybe it hasn't picked up at all and this level of illegal activity has always existed, but fewer people were caught. Whatever the case, it's shocking.
Nothing provides a better taste of just how out of control insider trading has become than the wire tap tapes that the Securities and Exchange Commission released of Mr. Rajaratnam talking to his 'clients.' He obviously didn't watch The Wire.
Listen to the tapes. They're well worth your time.
Tim Kiladze