Sunday, January 12, 2014

Indians in insider trading

Anil Kumar and Rajat Gupta are the names that come to our mind whenever anyone talks about the evil of insider trading. They formerly worked for McKinsey and Co., perhaps one of the most prestigious consultant firms in the world. The fact that top ranked officials in such a firm could indulge in the nefarious practice rattled several erstwhile clients who trusted the character and capacity of consultants.

Indians figure disproportionately in the list of suspected insider traders. The latest to appear in this abominable list is 39-year-old Mathew Martoma whose name was Ajay Mathew Thomas before he was expelled from Harvard Law School for forging his 1st year grades in applications for clerkship with judges. He had also studied in Stanford University Graduate School of Business.

The charge against him now is that he indulged in insider trading while being a funds manager at SAC Capital Advisors promoted by Steven A. Cohen. He is alleged to have made illegal use of non-public information relating to an experimental drug for Alzheimer's disease. This transgression of law is supposed to have fetched additional profit of $276 mn. for the company and a consequent $9.3mn. bonus for Martoma. This episode of insider trading is notoriously called as "the most lucrative insider trading scheme ever charged". Of course, this record may not hold for a long time!

Mathew (let us call him so because this is common between his old and current names) has been described as an intelligent, ambitious and 'idealistic' young scholar by his friends and as extraordinarily intelligent, remarkably analytical and wonderfully fair-minded individual by his professors.

What is the message from this developing story? Do we succumb to greed for pelf when business pressures mount? How does an idealistic person become an insider trader? Are there both Dr.Jekyll and Mr.Hyde in each one of us with the latter always waiting for an opportunity to manifest himself?

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