Insider trading program at JPM

Discussion in 'Wall St. News' started by Pekelo, Mar 17, 2008.

  1. Pekelo


    Whistleblower exposes it at Wikileaks:

    "Documents obtained earlier this month by Wikileaks from JP Morgan Private Bank, which subtitles itself as "World class solutions for wealthy individuals and families", show the firm has a dedicated '10b5-1 Selling program,' along with a 'dedicated 10b5-1 team' to help its clients take advantage of the loophole.

    Here's how it works:

    1. An insider client transfers all or a portion of their company stock into a JP Morgan Securities Inc. brokerage account.

    2. The insider then develops, in conjunction with the 10b5-1 team, a 'phased, pre-planned sales program to be executed at either market or

    specified prices'.

    3. Depending on the information available to the insider (but not the public), the insider can decide whether to execute the sale or not.

    By gaming the system this way, JP Morgan teaches insiders how to use their knowledge to create a rigged market, one in which it is the "house" that always wins, and the small investor that always loses.

    According to a statistical research paper published by Stanford's Graduate School of Business in September last year, executive 10b5-1 trades beat gains relative to non 10b5-1 executive trades by more than 500%."

    Edit: Pretty good discussion about it here: