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Time to Reform Insider Trading Rules?

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  • Description

    Former SEC Chairman Harvey Pitt on calls for tighter insider trading regulations.

  • Duration 4:02
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This transcript is automatically generated

Well you've seen the string of recent insider cases there's been a ton of them.

And they prompted a group of for prep professional investors that is to seek tougher trading rules for corporate executives.

The group highlights a recent study that shows trades highly beneficial -- -- just before bad news hits.

So is it time the FCC got tough on -- let's ask.

Former FCC chairman -- pet Harry at heart it's great to have you back on the show I want -- some details here of what the council of institutional investors found.

Basically they looked at 15100 corporate executives.

Who enjoy an average gain of 10%.

Aborting a 10% -- within a week of their traits or something going on here is this TU is it indicative of that have a bigger problem may be a legal problem.

It would seem so they -- to 20000.

Executives trading and they found over 14100.

Had.

Unusual extraordinary gains immediately before news announcements.

Based on my government experience that's just too much to be attributed to good luck -- Well you know everybody's -- about these corporate executive treating plans.

And I these CEOs don't bite sell like you and I do they they have to follow special role rules that is tell us about this ten B 51 plan.

Well them for.

This of this rule is very valuable.

Basically.

Corporate executives are going to have.

Material information.

And what's the rule doses -- allows them at a time when they have no material information.

To set up a trading plan so that even if they come into possession.

They can buy or sell their company stocks in accordance with the plan.

What we're seeing here is the possibility.

That many of these people may be manipulating.

Their plans to take advantage of inside implantation and how to they do that.

Well they can do that.

For one thing by a abandoning an existing plan modifying.

-- adopting a new plan there.

There have.

So see you know some bad news is gonna come out -- you say okay.

I think maybe I needed change that plan so I can actually.

-- sell now at this bad news or by now if it's good news.

That seems to be.

What the -- police suggests might be happening.

And so there's a real need for a very careful look which I think the SEC is engaged -- doing.

You know it's interesting because with.

-- a lot about Iraq are Rodman.

David Sokol who was originally it was later cleared.

Lots of conversations about individual actors but this is something I think much more pervasive -- fundamental.

This is a lot a lot of corporate CEOs and other executives who really taking advantage of the system.

-- -- -- You're absolutely right because.

Some of those people were outsiders.

But here we're dealing with insiders.

People who are actually privy to the information.

Because that's their job and when they trade on -- kind of information if they have done so.

That's a breach of all sorts of rules and requirements.

And it's illegal.

Well and you say the good news is the rules are on the -- -- to stop this now we don't have to have a raft of new rules we just need to enforce what we have.

I believe that and there have been SEC enforcement actions but the word now is.

That in the line of the report which was published the SEC.

Is taking a closer look and so -- the US attorney in New York.

Well I'm sure action to follow Harvey Pitt thanks for coming on tonight always great seeing thank you.

Thank you.

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