Stephen Foley: The goalposts for insider trading have not moved, despite the Wall St noise

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US Outlook: What a lot of bleating we have heard this week from Wall Street, as federal investigators launched the latest wave of their three-year blitz on suspected insider trading. There have been FBI raids on hedge fund offices, subpoenas served on some of the most powerful fund managers in the land, and charges laid. And it is far from over.

The reaction from the industry has been that it is being unfairly targeted by an ambitious public prosecutor who has bullied guilty pleas from minor players and moved the goalposts over what exactly constitutes insider trading. We have even witnessed the spectacle of Wall Street's surrogates arguing that there might not be anything wrong with insider trading, anyway, since no one gets hurt and it makes markets more efficient.

Well, no. It goes without saying that Preet Bharara, the US Attorney in New York, in the same post that launched Rudy Giuliani and Eliot Spitzer to higher office, is ambitious. It also goes without saying that there is imprecision in the term "material, non-public information" – the legal definition of insider information on which investors are forbidden to trade.

But critics of Mr Bharara are flat wrong to suggest he is criminalising normal investment research. His latest focus appears to be so-called "expert networks", which specialise in introducing traders to experts from industries or even specific companies in which they are interested in investing, at rates that can run to hundreds of dollars an hour.

At their best, these networks are just another form of market research, for which investors have always been willing to pay through the nose. At their worst, though, they are institutionalised temptation. Learning about trends in a particular industry, or the reputation of a particular company, is all very helpful, but it pales against the money that could be made from a tip about a forthcoming takeover or profit warning. The complaints filed in this investigation so far, in the 14 months since Galleon founder Raj Rajaratnam was arrested, have not been especially detailed, but many of the trades they relate to came before takeovers and earnings results. When Rajaratnam's trial starts in January, I will be surprised if it departs far from the popular understanding of insider trading.

Responsible firms know full well that there is a line that must not be crossed, and have drawn up compliance procedures accordingly. Most expert networks impose tough rules. Some hedge fund managers refuse to meet executives from public companies at all. Companies themselves have intricate disclosure policies drilled into staff.

It really isn't as grey as these people would have you believe.