Insider trading is an area of risk that hedge fund management finds very difficult to identify and prevent. While the problem has become increasingly prevalent, the tools to be able to assist hedge fund managers have not expanded proportionately. A break-down in personal trust in the industry as a whole may be to blame.
The problem in the area of insider trading at hedge funds is well-known. Recent high profile hedge fund cases are in the press day after day: the Galleon case, the expert network cases, followed by the Diamondback/Level Global/SAC case of last week. Assuming the problem doesnât originate from top management, what tools do hedge funds have to combat insider trading by their employees? And, more importantly, are they effective?
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