Tipping

I have some friends working in the Big 4 accounting firms and investment banks. They often complain that they have been prohibited to buy many good companies listed on SEHK because such companies are their auditing or due diligence clients. However, there are always people willing to take the legal risk.

Last week SEC alleged that from summer 2006 through fall 2007, James E. Gansman, a former partner in Ernst & Young's Transaction Advisory Services department, tipped his friend Donna Murdoch about the identities of at least seven different acquisition targets of clients who sought valuation services from his firm. Murdoch was a registered securities professional and managing director of a Philadelphia-based broker-dealer and investment banking firm.

Gansman misappropriated the information about pending acquisitions on numerous occasions in breach of a duty of confidentiality owed to E&Y and its clients. Murdoch used the non-public information to trade in the securities of the target companies; to tip her father, who also traded; and to make recommendations to two others, who traded as well.

This insider trading case involves "tipping" - just like the case of the HK famous banker David Li. I always wonder whether the tipper has obtained any real benefit by tipping his friend to "get rich quickly".