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Lovely. Now we have ANOTHER government agency ripping people off. Are there ANY honest government staffers who pay their taxes and follow our laws?
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Two academics from the University of Virgina got a hold of the trading records of SEC employees—then they built a mock hedge fund to see how it would do. The results are all in a paper presented at UVA's Darden School of Business.
The academics, Emory University professor Shivaram Rajgopal and Georgia State University accounting Ph.D. candidate Roger M. White found that SEC employees tend to sell a company's stock before the SEC takes enforcement action against the company.
The result, they wrote, were abnormal returns of about 4 percent for the market in general, and about 8.5 percent for the U.S. stock market. That's significant. While an SEC employees' stock purchases are normal, their stock "sales appear to systematically dodge the revelation of bad news in the future," according to the paper's findings.
Alternatively, one might consider that the typical SEC employee is better educated and has a better grasp of markets than the average bear. Nonetheless, it would be easy enough to require employees to use blind trusts.
Some here may recall the 2011, 60 Minute piece about insider trading within both chambers of Congress.
They had an Alabama congressman who profited from insider information about the impending financial meltdown and he bet on it. Then there's the house majority speaker who opposed the ACA but bet in favor of it, not to be confused with the minority speaker betting on a VISA deal.
Most of those who leave Congress do so with substantially more wealth than when they arrived.
It is still not Kosher that they get to sell out of the stock knowing they are about to launch an investigation.
Quote:
In response, the S.E.C. explained that any abnormal trading was because
employees were forced to sell certain stocks if they were about to begin an
investigation related to those companies. So the title of the paper could have
perhaps been “S.E.C. Staff Profits Handsomely Through Dumb Luck.”
In reality, the paper found that the S.E.C. employees
did not earn any abnormal return when purchasing stocks (abnormal returns here
is a term of art and simply means that the S.E.C. staff made more than what
would be expected for an investor without inside information or stock-picking
skill – a so-called “uninformed investor”). It found that the S.E.C. staff
members buy stocks just like any “uninformed investor,” meaning they earn what
anyone else would – the market return. So far, so good.
However, the authors also found that the S.E.C. staff
is abnormally good at selling stocks at the right time. When the agency staff
members sold during the period analyzed, the authors found, they made gains of
approximately 8 percent above the “uninformed investor.” In other words, the
agency’s staff members were dumping their shares before bad news, such as – not
coincidentally — an S.E.C. investigation.
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