Analysts Face Channel Check Insider-Trading Investigation
Analysts could be facing an information drought, as US federal prosecutors appear to be targeting channel checks for signs of potential insider trading. The checks – which are often used as evidence in reports of boosted or reduced production, incoming products and other speculation, particularly with Apple – have led to investigations of several small research firms in the US, while "expert network" companies, which promise to link investors with company employees, are also included.
"Insider trading basically comes down to where you know or ought to know that the person from whom you're getting this information has a duty to someone else to keep it confidential. If you go in and pay the mail clerk to give you special information, that's not proper." former Securities and Exchange Commission Paul Atkins
For a company like Apple, investors claim that channel check data is as important as the company's quarterly earnings release, at least in terms of ongoing stock movement. Hedge funds and investors have reportedly been consulting with legal teams to evaluate the extent of the research they can legitimately complete.