http://www.washingtonpost.com/blogs/won ... employees/
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The incredible stock-picking ability of SEC employees
By Jia Lynn Yang
February 27 at 3:44 pm
A new report raises ethical questions about stock trades by employee at the Securities and Exchange Commission. (REUTERS/Jonathan Ernst)
A new report raises ethical questions about stock trades by employee at the Securities and Exchange Commission. (Reuters/Jonathan Ernst)
Forget hiring a top hedge fund to manage your portfolio. Your better bet might be an employee at the Securities and Exchange Commission, according to a new report suggesting that regulators are trading on inside information relating to investigations and upcoming enforcement actions.
In the report titled "The Stock Picking Skills of SEC Employees," researchers found that SEC employees' stock purchases look like your average person's. But when these employees sell their stocks, they appear to systematically beat the market by making sales within weeks of costly enforcement actions by the agency.
"These results suggest that SEC employees potentially trade profitably under the new rules, and that at least some of their profits potentially stem from trading ahead of costly SEC sanctions and on privileged non-public information," write Shivaram Rajgopal, a professor of accounting at Emory University, and Roger M. White, a doctoral student in accounting at Georgia State University. "In short, it appears that SEC employees continue to take advantage of non-public information to trade profitably in stocks under their regulatory purview." ... "
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