Super Quant Profs Accused Of Insider Trading

NationalEconomist.com ^

[drbasketball]

It is clear these profs were very naive. Such unusual stock and option buying before a deal would result in SEC scrutiny. Real insider traders no how to hide their tracks. When Gordon Gekko has Bud Fox in the movie Wall Street tip off the financial media to a coming takeover, “Blue horse shoe loves anacot steel”, it’s to create buying from others, to provide cover for Gekko’s own buying. If the SEC questions him, his reply can be, “Hey, I bought because of the news item in the paper and the fact that volume picked up in the stock.”

From the SEC complaint (our emphasis):

Tucker invested more than $1 million in ISE securities during the course of the scheme, buying 20,000 shares of ISE common stock and more than 900 ISE call option contracts, all of whose strike prices were above, and most considerably above, the contemporaneous trading prices of ISE’s common stock.

Tucker purchased more than 700 of the ISE call option contracts that he bought during the scheme in the final four days of trading before the public announcement. The strike prices of these options were substantially out-of-the-money, in amounts ranging from $6 to $14 per contract above ISE’s contemporaneous common stock prices. In addition, more than half of his purchases comprised a full 100 percent of the volume in the respective options series on the dates Tucker traded.

And, to discuss their insider trading in emails is amateur night.

The SEC again:

In at least five separate emails, Tucker used veiled language to communicate with Marshall, and sometimes Larson, about the unlawful trading. In these communications, Tucker described the performance of certain ISE securities purchased in his account, and discussed new plans to augment, or “leverage,” this unlawful trading....