U.S. authorities capping colossal insider trading investigation

Federal prosecutors in New York, the FBI, and the Securities and Exchange Commission (SEC) are capping a three-year colossal insider trader investigation involving expert networks, the Wall Street Journal reported.

The implicated parties include expert networks, investment bankers, hedge funds, mutual funds, and analysts. The scope of the charges could eclipse the impact on the financial industry of any previous such investigation.

An Expert Network is a network of industry professionals or experts who provide consultations for a fee. Law firms (for expert testimonies), marketers, and investors are some of their customers.

Allegedly, expert networks leaked insider information to various players on Wall Street, who then profited on that information before it was publically disclosed.

The insider leaks were usually about key company developments or pending deals like mergers and acquisitions (M&A). Many of the implicated companies are in the technology and healthcare industry.

Some deals under scrutiny for insider trading include:

1) Merck's (NYSE:MRK) $41-billion acquisition of Schering-Plough in November 2009. Shering-Plough shares jumped 8 percent the day before the announcement and 14 percent the day of the announcement.

2) AstraZeneca's (LON:AZN) $15-billion takeover of MedImmune in June 2007. MedImmune shares rose 18 percent the day of the announcement.

3) Abbott Laboratories' (NYSE:ABT) $1.4-billion takeover of Advanced Medical Optics in February 2009. Advanced Medical Optics shares spiked 143 percent the day of the announcement.

4) Insider information about Advanced Micro Devices (NYSE:AMD), possibly regarding the spinoff of its manufacturing operations into a joint venture with the government of Abu Dhabi in November 2007.

Prominent firms that are implicated include Goldman Sachs, hedge fund SAC Capital Advisors, hedge fund Citadel, and mutual fund Janus Capital Group.