Emmett Stanton, co-chair of the Fenwick & West Securities Litigation Group, was recently quoted in a Reuters article entitled "Sophisticated Crooks Elude Radar in Trading Probes."
Prosecuting insider trading is now a priority for the U.S. Securities and Exchange Commission, and this year it announced plans to set up a hedge fund unit within its enforcement division to combat unlawful trading. However, Stanton and other experts noted the SEC faces significant challenges to successfully tracking and convicting unlawful activity at hedge funds and by other highly sophisticated investors.
"A hedge fund trader may have 50 bits of information from 50 phone conversations, and maybe it turns out that one of those people he was talking to was saying more than he should have," said Stanton.
He added, "But to connect that one bit of information, and conclude it was the critical bit of information – that's a very, very hard thing to prove."
As fraudulent investors develop more complex strategies, it remains to be seen whether the SEC will outwit them in the cat-and-mouse chase to prosecute illegal trading.
Read the entire article by Reuters reporter Martha Graybow.