US regulators are strengthening market surveillance methods amid concern that hedge funds and other large investors are systematically engaging in hard-to-detect forms of insider trading.
The initiatives include an international communication system in which regulators around the world can alert one another to suspicious trades and traders, as well as new databases that track the connections among hedge funds, their investors and officers and sources of information about specific public companies.
The efforts also extend to the Securities and Exchange Commission’s inquiry into whether the major Wall Street firms are warning favoured customers about pending large trades, as well as the SEC probe of research firms that pay employees of public companies to serve as consultants to hedge funds.
At the base of all the efforts, authorities acknowledge, is a sense that the traditional methods of tracking insider trading, which do a pretty good job of catching individuals, are not as effective at ferreting out malfeasance by large institutional traders.
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