First arrest in high-profile insider trading investigation

[Hannah Bell]

The US government arrested Don Chu, an investment research firm employee Wednesday, in the first charge related to an ongoing insider trading investigation.

District attorney Preet Bharara said Chu arranged “for insiders at publicly-traded companies to provide material, nonpublic information to...clients.” In exchange, the government alleges, Chu’s clients, mostly hedge funds, conducted transactions through his company’s trading arm.

The US attorney did not reveal the name of Chu’s firm, but he has since been identified as the Taiwan associate for the US-based firm, Primary Global Research. The firm is located in California and has offices in New York. It is part of a growing number of “expert network” firms, which pair investment firms with people knowledgeable with the businesses they invest in.

The US attorney did not reveal the name of Chu’s firm, but he has since been identified as the Taiwan associate for the US-based firm, Primary Global Research. The firm is located in California and has offices in New York. It is part of a growing number of “expert network” firms, which pair investment firms with people knowledgeable with the businesses they invest in.

In recent years, hedge funds and other large investors have moved away from using research generated by large banks and have relied more on “expert networks” like Chu’s company. There are currently about 40 such firms, up from eight in 2001.

Over a third of large investment companies use these types of expert networks, according to a 2009 survey. Consultants in these networks receive hundreds of dollars per hour for meetings and phone calls with financial firms, and the networks’ clients often pay tens of thousands in annual subscription fees.

http://www.wsws.org/articles/2010/nov2010/insi-n27.shtml

[The_Casual_Observer]

1. Institutionalized insider trading, it worked better than the best crystal ball ever could.

It's hard to imagine what they'll do without it.