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KILLER_CLOWN
08-25-2011, 10:56 PM
By Agence France-Presse

Raw Story

Bernard Madoff, who ran one of the biggest Wall Street frauds in history, says that many of his former colleagues in the financial industry are also crooks.

In a prison interview with Fox Business Network published Thursday, the Ponzi scheme mastermind claimed that insider trading “goes on at every major firm’s Prop Desk and at every level of the industry in plain sight.”

“It is unfortunate, to say the least, that the financial services industry is so corrupt and stacked against the typical investor,” he told Fox in an email.

One of Wall Street’s most notorious criminals, Madoff used his powers of persuasion to trick thousands of clients over decades to invest with him.

He stole from fresh deposits to create fake profits for existing clients, providing high and steady returns that seemingly made him one of the industry’s top performers.

The Ponzi scheme collapsed in 2008 and after Madoff pleaded guilty the following year, he was given a prison sentence of 150 years.

In the Fox interview, he claims that his scheme could not have worked if clients hadn’t willfully ignored warning signs that he was not running a legitimate investment business.

Read More: http://www.rawstory.com/rs/2011/08/25/madoff-insider-trading-rife-on-wall-street/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheRawStory+%28The+Raw+Story%29

Jenson71
08-25-2011, 11:08 PM
There was a pretty good article in The New Yorker a couple of months ago on Wall Street culture, the attorney's trying to keep up, the Obama administration's apparent lack of motivation. It was during the whole trial of the Indian-trader. Rah______.

Jenson71
08-25-2011, 11:09 PM
http://www.newyorker.com/reporting/2011/06/27/110627fa_fact_packer

BucEyedPea
08-26-2011, 06:46 AM
Would this happen to include The Plunge Protection Team?


BTW I don't think insider trading is illegal in other countries.

Jenson71
08-26-2011, 06:56 AM
Would this happen to include The Plunge Protection Team?


BTW I don't think insider trading is illegal in other countries.

In most countries it is.

BucEyedPea
08-26-2011, 07:27 AM
Would you name them, then. I think some of it is new in some countries, as in recent years, due to more internationalization but not before.
It wasn't a criminal offense in Hong Kong, the freest economy in the world, until 2003.

Insider Trading laws don't apply to Congress or their staffs, and yet they have access to far more inside information. It's no wonder they outperform others.
But they regulate everyone else.

Jenson71
08-26-2011, 07:48 AM
Name them, then. I think some of it is new in some countries, as in recent years, due to more internationalization but not before.
It wasn't a criminal offense in Hong Kong, the freest economy in the world, until 2003.

Here's a brochure about anti-insider trading implementation in the EU: http://www.cityoflondon.gov.uk/NR/rdonlyres/3950D4A4-5792-412C-BA89-1B30827101C7/0/BC_RS_eudirectives_1205_FR.pdf

You can read the summary on page 6-7 for a quick overview. I think you're right about the novelty of it.

BucEyedPea
08-26-2011, 07:51 AM
Here's a brochure about anti-insider trading implementation in the EU: http://www.cityoflondon.gov.uk/NR/rdonlyres/3950D4A4-5792-412C-BA89-1B30827101C7/0/BC_RS_eudirectives_1205_FR.pdf

You can read the summary on page 6-7 for a quick overview. I think you're right about the novelty of it.

This is what I mean by internationalization. I know the EU implemented changes. This is due to treaty.

Amnorix
08-26-2011, 07:55 AM
Would you name them, then. I think some of it is new in some countries, as in recent years, due to more internationalization but not before.
It wasn't a criminal offense in Hong Kong, the freest economy in the world, until 2003.

Insider Trading laws don't apply to Congress or their staffs, and yet they have access to far more inside information. It's no wonder they outperform others.
But they regulate everyone else.



Eh? Cite? I'm not aware of Congress being exempt from insider trading laws.

blaise
08-26-2011, 08:07 AM
I had a college professor who spent a lot of time on the Efficient Market Hypothesis that basically said the only way to keep making above average money over a long term was to be a crook. I don't agree with that, though.

BucEyedPea
08-26-2011, 08:25 AM
The Hill (http://thehill.com/blogs/congress-blog/politics/25850-apply-same-insider-trading-restrictions-on-members-and-staff-of-congress)

The Securities and Exchange Commission (SEC) does not have the authority to hold employees of Congress or the Executive Branch liable for using non-public information gained from official proceedings for insider trading. Under current law, “insider trading” is defined as the buying or selling of securities or commodities based on non-public information in violation of confidentiality -- either to the issuing company or the source of information. Most federal officials and employees do not owe a duty of confidentiality to the federal government and thus are not liable for insider trading.

More:

Forbes (http://www.forbes.com/sites/kylesmith/2011/06/01/insider-trading-rules-that-dont-apply-to-congress/)

WSJ (http://online.wsj.com/article/SB10001424052748703431604575522434188603198.html)

The Street (http://www.thestreet.com/story/11014777/1/insider-trading-laws-dont-apply-to-congress.html)

Jenson71
08-26-2011, 08:32 AM
Interesting. Must be some sort of policy reasoning behind that.

Bewbies
08-26-2011, 09:47 AM
Interesting. Must be some sort of policy reasoning behind that.

Corporate greed bad, government greed good.

You don't go to Washington DC to serve anymore, you go there to enrich yourself.

Dave Lane
08-26-2011, 09:48 AM
In other news, duh.

If you only knew you'd never buy stocks again.

Swanman
08-26-2011, 11:50 AM
I had a college professor who spent a lot of time on the Efficient Market Hypothesis that basically said the only way to keep making above average money over a long term was to be a crook. I don't agree with that, though.

When you look at EMH and widely-traded stocks it pretty much holds true because information is so readily available on those big stocks. However, there is money to be made if you are good at trading lower-volume stocks, as the information is a bit more scarce so the markets are a bit more inefficient for them.

vailpass
08-26-2011, 12:05 PM
It isn't whether it happens but whether you can position yourself to benefit.

KC native
08-27-2011, 02:14 PM
I had a college professor who spent a lot of time on the Efficient Market Hypothesis that basically said the only way to keep making above average money over a long term was to be a crook. I don't agree with that, though.

Yea, EMH is dead.

JohnnyV13
08-27-2011, 03:04 PM
I had a college professor who spent a lot of time on the Efficient Market Hypothesis that basically said the only way to keep making above average money over a long term was to be a crook. I don't agree with that, though.

The efficient market hypothesis has been pretty much blown out of the water by the derivatives collapse.

The entire financial system bought into a correlation formula built on the efficient market hypothesis, and we found out that markets aren't perfectly efficient.

JohnnyV13
08-27-2011, 03:13 PM
When you look at EMH and widely-traded stocks it pretty much holds true because information is so readily available on those big stocks. However, there is money to be made if you are good at trading lower-volume stocks, as the information is a bit more scarce so the markets are a bit more inefficient for them.

You do know the trend is for companies NOT to go public?

in 1996 there were over 600 IP0's. Last year there were slightly over 100. When facebook did a major issue, they didn't go public. Instead, they hired Goldman Sachs to implement a large scale private issue to "qualified" investors. Under Glass-Stegall, a privately held company can issue securities to up to 500 investors if they meet statutory "qualification" criteria (e.g. have a net worth more than 1 million IIRC) without being bound by publically held reporting requirements.

In the facebook case, I think GS wanted a minimum 2 million investment from the 500 investors to raise $1 billion in capital, IIRC giving facebook a presumed pre-money valuation of around $45 billion.

JohnnyV13
08-27-2011, 03:15 PM
Would you name them, then. I think some of it is new in some countries, as in recent years, due to more internationalization but not before.
It wasn't a criminal offense in Hong Kong, the freest economy in the world, until 2003.

Insider Trading laws don't apply to Congress or their staffs, and yet they have access to far more inside information. It's no wonder they outperform others.
But they regulate everyone else.

Ummm...BEP, don't you remember United Fruit? I think that both Executive staff members AND congress have to put their stocks into a trust they can't control while they are in office. I don't know about congressional staff members.

BucEyedPea
08-27-2011, 03:43 PM
Ummm...BEP, don't you remember United Fruit? I think that both Executive staff members AND congress have to put their stocks into a trust they can't control while they are in office. I don't know about congressional staff members.

If that's true it was not mentioned in the links from Forbes, WSJ etc. Please cite a source for this.

JohnnyV13
08-27-2011, 05:54 PM
If that's true it was not mentioned in the links from Forbes, WSJ etc. Please cite a source for this.

I'm pulling this from memory.

I'm certain about the president and, at least, senior executive appointees like cabinet members. This occurred after the United Fruid debacle when Dean Atcheson was either Sec of State or Sec of Defense.

Atcheson was heavily invested in united fruit, and a S. American country nationlized the property they held in some kind of land reform scheme. Atcheson had the CIA fake a communist insurgency (including playing fake firefights on loudspeakers to fool visiting press), in order to overthrow the existing regime.

Later, it came out that Atcheson held a large position in United Fruit and the new regime, of course, restored their property. Ever since then, they passed a law that, at least, the president and senior cabinet officials, had to put securities holdings into a blind trust while they held office.

I'm not sure about congress. I'll have to look it up.

JohnnyV13
08-27-2011, 06:12 PM
Ok, the united fruit thing was in Guatemala, and it wasn't Dean Acheson, it was Allen Dulles, who was CIA director.

JohnnyV13
08-27-2011, 08:06 PM
ok, here it says there is no specific mandate requiring use of blind trusts by goverment officials, but that it is only ONE method to avoid conflict of interest avoidence: which IS required by house and senate internal ethics rules. Qualifying blind trusts are regulated by federal law.

http://assets.opencrs.com/rpts/RS21656_20050923.pdf