The slimier characters in the hedge fund industry will always find a way around the rules. Excessive regulation is not always effective regulation.
SEC investigates ETF use in insider trading by Kara Scannell, Financial Times
“The Securities and Exchange Commission is investigating whether Wall Street traders are using exchange-traded funds as a means of disguising insider trading…ETFs have emerged as a possible mechanism for maximising gains in one stock while potentially masking trading patterns, people familiar with the matter say…In one scenario, a trader could learn information about a company, buy an ETF that includes the company’s stock, and short sell the other stocks in the ETF.”
Jeremy Jones, CFA
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