Bloomberg BNA Publishes Akin Gump Article on Big Data and Risks of Insider Trading
Bloomberg Law's Securities Regulation & Law Report has published the article “Big Data and the Risks of Insider Trading,” written by Peter Altman and Kelly Handschumacher, litigation partner and associate, respectively, at Akin Gump, and Jennifer Hustwitt, a vice president in the financial institutions group at Marsh & McLennan. The article looks at how investment advisors can prevent, or even mitigate, liability for insider trading in connection with the use of alternative data.
The authors begin with a hypothetical scenario in which a hedge fund unwittingly trades on material nonpublic information (“MNPI”) embedded in its data feeds. They then outline the elements of insider trading and show how they would apply in this situation, writing that data can sometimes be material when it significantly alters “the total mix of available information through the eyes of a reasonable investor.”
Altman, Handschumacher and Hustwitt proceed to discuss how the SEC proves insider trading and whether the hedge fund in the scenario described can be held liable. They conclude by offering some best practices to limit the risks of insider trading.
To read the full article, please click here.