Tuesday, October 31, 2017

SEC Employees Earn Insider-Trading-Like Returns—Study

From Institutional Investor, October 30:
Employees at the Securities and Exchange Commission may benefit from divesting companies ahead of investigations, research shows.

Employees at the U.S. Securities and Exchange Commission earn investment returns similar to the insider traders they prosecute, according to new research from Columbia University and Arizona State University.

A portfolio mimicking trades made by SEC employees between 2009 and 2011 earned excess risk-adjusted returns of about 4 percent a year for all securities, with abnormal gains jumping to 8.5 percent when only stocks of firms based and registered in the U.S. were tracked, found Shivaram Rajgopal, a professor of accounting and auditing at Columbia’s business school, and Roger White, an assistant professor at Arizona State University’s W.P. Carey School of Accountancy, in a paper published this month.

Rajgopal and White said the excess returns seemed to be primarily due to employees selling stocks ahead of bad news revelations. SEC employees, they explained, are required to divest their holdings in companies they are assigned to investigate....MUCH MORE
Harking back to 2011:
Trading for Fun and Profit--"Congress insiders: Above the law?"
A Congressional Insider Trading ETF (SCUM)
UPDATE: Short the Congressional Insider Trading ETF (SCUM) 

A year earlier it was the lawmakers' employees:
"Congressional Staffers Gain From Trading in Stocks"