Guest Contributor: Mark S. Enslin
A former Bristol-Myers finance executive pleaded guilty earlier this year to an insider trading charge, admitting to buying stock options in a biotech company that Bristol-Myers was preparing to buy. As part of the plea, the executive agreed to forfeit $311,361 in allegedly illegal profits, and he now faces a maximum of 20 years in prison and $5 million fine when he is sentenced later this year.
This relatively innocuous insider trading case is interesting for at least two reasons. First, it’s a good reminder that insider trading remains a high priority for the SEC and other regulators. In fact, over the past three years, the SEC has filed more insider trading cases than in any three-year period in the agency’s history. Many of these actions involved registered representatives, hedge fund managers, corporate insiders, and other financial professionals who conspired in various forms to trade on non-public information.
The second interesting aspect of this case is what investigators revealed was one of their key pieces of evidence: they were able to trace the fact that the executive had run a series of Internet searches on insider trading detection just prior to some of his trades, including a review of an article entitled “Ways to Avoid Insider Trading.” Technology continues to evolve at an astounding pace, and the effects of that evolution on the securities industry will continue to be significant. When the SEC is able to utilize such technology on the back end to apprehend those who violate the securities laws, it’s only a matter of time before the SEC and other regulators will expect those in supervisory positions to utilize that same technology on the front end to attempt to stop the violations before they occur. Supervision of Internet usage, so called “social media” websites, and other electronic media remains a “hot button” issue and will only continue to grow in importance.