For the third time in a roughly a year, the business pages are aflame with allegations of insider trading rings. Once again, Wall Street is running for cover.
It is difficult to understand why some market participants apparently disregard what is, at its heart, a fairly simple principle regarding capital markets in the United States: if you share or trade on insider information, you will likely get caught, and the government will delight in making an example out of you.
In an age where the airwaves are filled with discussions about how “intimate” the government should be allowed to get in the course of your air travel experience, what is most surprising is that Wall Street has apparently been caught off guard by this latest investigation. This despite the fact that the publicity of the Galleon case in November of 2009 should have put all investment management professionals on notice that the government could and would use every means at their disposal- including wiretapping- to find evidence of wrongdoing.
At Maven, we are committed to the ethical exchange of knowledge, perspective, insight, and opinion. We believe that professionals of all kinds can benefit from others’ experience and knowledge. Like our Membership, our Client base is broad and diverse, and our Clients’ uses of our platform vary considerably. A small health food manufacturer may use Maven to research new technologies to expand its operations. A venture capital firm may use Maven to research the basis of a promising entrepreneur’s idea. A farmer may use Maven to research the pros and cons of a particular animal waste management system. We are proud to say that these real-life examples are Maven at its best. Maven was borne of the belief that facilitating the exchange of knowledge through our Global Knowledge Marketplace would help professionals make better business decisions, and our experience to date has clearly demonstrated that.
While we at Maven do not consider ourselves to be an “expert network,” (read: a boutique consulting service for big hedge funds) we are pleased to serve members of the investment management community, as long as they adhere to our strict standards of behavior. When we began Maven, we knew that supporting investment management Clients would call for a robust, comprehensive, technologically advanced, and fully customizable compliance and conflict management system. So we built one.
We believe that research is the foundation of capital markets, and crucial to the efficient distribution of capital. The efficient markets hypothesis (upon which our capital market system is based) and the mosaic theory of investment research (which most fundamental investment professionals follow) demand that market participants rigorously investigate their potential investments and allocate capital at fair prices accordingly. Independent research, unburdened by the conflicts of interest that arise when, say, an investment bank is tasked with evaluating the fair stock price of one of its best customers, combines with Regulation FD to level the playing field among market participants. Our government has historically been supportive of the independent research industry, and we expect that support to continue.
Wall Street without independent research conducted by competent, well-trained, and ethical professionals would not only be economically inefficient, it would reduce the industry to what it should never be: an elaborate roulette table, with rampant volatility, unpredictable results, and the odds tipped in favor of a select few. Great for gamblers, astrologers, chicken-bone readers, thrill-seekers, and “the house” perhaps; terrible for those of us entrusting our savings to professional money managers.
The investigations that have been recently reported in the press allege the solicitation and provision of insider information, and potentially involve certain firms in the so-called “expert network” industry. But we have been struck by the omission of what we consider to be a key principle: whether you connect to someone through an expert network, through a business school classmate, through a former romantic flame, or through Facebook, LinkedIn, or even Maven, the exchange of insider information is illegal, unethical and unacceptable; networks are not the problem – unmanaged conflicts are the problem. And Maven is the solution.
Maven’s robust, cutting-edge, technology-based Conflict Management System automatically screens out clear conflicts of interest. Furthermore, our customizable Conflict Management tools put our users in the driver’s seat, and require our participants to fully evaluate and avoid conflicted situations. Our goal is to ensure that none of our Mavens or Clients inadvertently find themselves in a potentially dangerous situation. Our approach empowers all participants to steer clear of trouble, and all activity on our platform is documented and available for the review and analysis by our Members and Clients.
Given our commitment to transparency and accurate, real-time record keeping, we believe that anyone intentionally seeking to solicit or provide insider information would be a fool to use Maven for such purposes.
Maven will continue to vigorously promote the virtues of our Knowledge Marketplace and micro-consulting platform to the investing community and the business world at large.