A high-profile technology analyst and expert network manager pleaded guilty to insider trading charges yesterday in New York as authorities continue their crackdown on the sharing of non-public information.
Broadband Research founder John Kinnucan was arrested by the FBI in February as part of an ongoing probe into insider trading and charged with counts of conspiracy and securities fraud.
Prosecutors allege he networked with insiders at companies, obtained sensitive information and then passed it on to hedge fund clients, charging them as much as $30,000 a quarter.
He paid his sources through a combination of methods such as buying them expensive meals, shipping food to them and offering tips on other companies, prosecutors said.
Just over a year before his arrest, Kinnucan made high-profile claims that he had refused to become an informant for the FBI. He later wrote an opinion piece in the New York Times, arguing that the US Department of Justice was ‘retroactively’ criminalizing activities that had been normal practice on Wall Street for years.
‘The type of research I provide to clients is pervasive in the financial community, the same kind of analysis provided not only by all investment banks, large and small, but also by an ever-expanding group of research boutiques, virtually all larger than mine,’ Kinnucan wrote.
‘Research providers are constantly struggling with the question of what constitutes appropriate information for our clients. Most of the picture here is gray, with a thin margin of black and white on either side.’
According to prosecutors, Kinnucan allegedly left ‘vile’ and ‘filthy’ messages at the office phones of federal prosecutors, FBI agents and two co-operating witnesses during the investigation.
The guilty plea is the latest development in an expanding crackdown on insider trading by US authorities.
Former McKinsey consultant Anil Kumar was sentenced last week to two years’ probation after cooperating with the government in its case against former hedge fund manager Raj Rajaratnam and former Goldman Sachs director Rajat Gupta, both of whom were jailed.
US prosecutors have charged 71 people with insider trading since 2009, convicting 65.
The growth of the expert network industry has put pressure on companies to ensure their disclosure controls are tight.
IROs have been advised to make sure there are guidelines in place explaining to all employees how corporate information should be handled.
