http://www.wallstreetandtech.com/story/showArticle.jhtml?articleID=201801138&pgno=1
When one thinks of information technology in the financial services industry, international offenses and global criminal activity probably do not come to the forefront. Information technology, however, plays a critical role in the 21st century in combating one of the industry’s most serious misdeeds—insider trading.
The SEC mandates firms monitor their employees for concerns of insider trading. There are many ways to do this, but as technology has developed, it has become both easier and more in-depth. This is evidenced by the fact that in the past year, over a dozen i-bankers, analysts, and executives have been faced with charges. There was less than this number in the entire decade of the 90s, and, let’s be honest, insider trading did not just surface in the past year.
Buzzwords associated with the tracking of potential insider trading are “highly sophisticated” and “automated.” While there is still a lot of detective-style investigative work that goes into nailing a suspect, a large part of the case is built upon these computer systems.
For instance, Sherlock Holmes never used complex event processing (CEP). CEP is an ultra-high level analyzer that uses detailed statistical measures such as event streams processing, event correlation and abstraction, and event hierarchies to detect complex patterns among many events and relationships between events. This means that it could detect a high volume of trades going on in a particular stock just before the announcement of a takeover or merger. The Financial Services Authority—the UK’s version of the SEC—just announced it will use a new technology platform to monitor suspicious activity that uses real-time graphical dashboards to provide alerts. Also available and employed by some companies in the US, this is known as an enterprise compliance system.
Another weapon in the fight against insider trading is already used by many companies in a different capacity. It’s great when an IT support person can remotely take control of your computer to fix problems, but that same technology can also be used to monitor activity or retrieve specific data. Ironically, recorded keystrokes on one i-banker’s Blackberry show that the last thing he actually entered before he was arrested on insider trading charges was the phone number to a well-known defense attorney.
We have said that financial services are one of the first adopters of new technology, therefore, it should be no surprise that those tracking misdeeds in the industry are also up on the technology. These new programs and processes prove that it is impossible to escape the long, technical arm of the law. That being said, people will still attempt insider trading. This just means that they will also need to get more sophisticated in their methods and try to hide irregularities even more. I think they will fail, at least eventually. There is such an increased focus on stomping out corporate crime in today’s tightened regulatory environment that the tracking will only increase. In this story, there were multiple law enforcement agencies working together, along with the financial regulatory bodies of each country, and the banker’s employer.
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3 comments:
I think this is an interesting article, showing how technology has greatly helped regulators to crack down on insider trading. Through one’s use of technology and the aid of technological devices on the part of regulators, tracing and recording one’s activities can be done more easily. However, I think an ethical dilemma arises because there is an issue of privacy, where regulators are even tapping into your mobile phones. It just goes to show that there is little personal privacy anymore and that with current legislation, the Government can monitor everything that you do.
I agree with Deepak that there is definitely an ethical dilemma when regulators tap into cell phones and other personal devices. I also think that the increase in technology has increased the opportunities that people have to initiate insider trading. It can be very hard to ignore that stock tip you heard about at work, knowing that you could be giving up thousands of dollars and technology increase not only the opportunity to share the information about the stock tip but also the chances of being caught doing so.
There is almost always an ethical dilemma when it comes to finding out weather or not some one is leaking insider information. The problem is that the only way to catch them is to tap there phones or e-mail because thats mainly how they get the information out. In the past it was easier to leak information because all they have to do is photocopy the documents and pass them off to someone. Now a days many people are to lazy to do that or think that due to the ethical dilemma they are safe because it enters in to the whole privacy issue.
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