Schneiderman targets 'Insider Trading 2.0' | Capital New York

Attorney General Eric Schneiderman today announced a settlement with BlackRock, the world's largest asset management firm, under which the company will halt its practice of receiving market-moving analysis before the public had access to it.

Schneiderman, who once called the practice "Insider Trading 2.0," began his investigation into BlackRock in July 2012, following a report in the New York Times that outlined the firm’s “advance survey” practice, which the attorney general said gave the company unfair access to market information unavailable to the public.

BlackRock maintained that its survey program solicited information from financial analysts that was based on previously published reports. But the attorney general's office said it uncovered evidence that the survey program's design allowed it to capture analysts' views on companies that had not yet been made public.

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BlackRock had been receiving research reports from financial analysts through the survey program for five years, although federal and state laws prohibit brokerage firms and analysts from selectively disclosing such information before the reports are disseminated to all customers entitled to them.

As part of the settlement, BlackRock agreed to discontinue the practice, a move Schneiderman’s office said could have far-reaching effects both because of BlackRock’s size (it managed more than $4 trillion in assets) and the company’s reach. BlackRock’s analyst survey program was the world’s largest, and the company has agreed to end the practice not only in the United States, but also worldwide.

In an address Schneiderman gave to the Bloomberg Markets 50 Summit in September 2013, the attorney general said the practice, which he dubbed “Insider Trading 2.0,” was responsible for “distort[ing] our markets far more than Albert Wiggin or Ivan Bosky or even Gordon Gekko could ever have imagined.”

In addition to agreeing to discontinue the practice, BlackRock will pay $400,000 to offset the costs of the attorney general's investigation. BlackRock neither admitted nor denied the Attorney General’s allegations.

“BlackRock deserves credit for recognizing the need for reform when it comes to the dissemination of information that can move markets,” Schneiderman said in an emailed statement.

“BlackRock’s agreement with my office to end its global analyst survey program and cooperate with my office’s investigation into the early release of Wall Street analyst sentiment is a major step forward in restoring fairness in our financial markets and ensuring a level playing field for all investors. The concept that there should be one set of rules for everyone is critical to protecting the integrity of our markets, which is why my office will continue to take action against those who provide unfair advantages to elite traders at the expense of the rest of us.”

Read the full settlement agreement here.

Author: Laura Nahmiasfollow this reporter

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