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News Link • Corruption

Material, Non-Public Information? Why JPMorgan Does Not Care; And Why If You Are A Corporate Insider

• Zero Hedge
 

A back of the envelope calculation indicates that insiders may have sold well over $10 billion worth of their own company's shares in the last quarter alone. Aside from what implications this activity has for claims of the recession being over, as those best familiar with their businesses can not wait to offload their holdings, a larger question is one of propriety, and whether insiders are abusing inside information loopholes, particularly if they are aware of material, non-public information when selling their stock.

In this environment of unprecedented insider selling, it makes sense to refamiliarize readers with JP Morgan's confidential presentation, "Hedging and Monetization" from February 2007, first presented by Wikileaks, which focuses exclusively on providing company insiders with mechanisms to circumvent not just regulatory curbs on insider selling, but to obfuscate market signals typically associated (but definitely not in this market environment) with an insider dumping boatloads of his or her own stock. In particular, JP Morgan latches on to the biggest regulatory loophole, courtesy of the SEC, namely Rule 10b5-1, which is a tacit understanding by the SEC that insiders can do whatever the hell they want, including trading purely on inside information, while providing affirmative defense in the case lawsuit(s) are brought up against them.

As a reminder, from the SEC's own rulebook:

 
 

Examples of insider trading cases that have been brought by the SEC are cases against:

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