CURBING THE STOCK EXCHANGE thieves and gangstars

CURBING THE STOCK EXCHANGE CHEATS

Insider dealer New York financier Ivan Boesky (centre) seen leaving the Feder al Court in Manhattan in 1987. After admitting using inside information about company mergers for his own profit, he was fined $100 million and jailed for three years.

From the earliest days of stock exchanges, people have attempted to perpetrate swindles. In the 1720s, Britain’s Chancellor of the Exchequer, John Aislabie, was imprisoned in the Tower of London for ‘infamous corruption’. He had lined his own pockets during the sale to the public of shares in the South Sea Company, a speculative enterprise which ruined many investors.

All countries have their own laws to prevent cheating, and some have agencies, such as the US Securities & Exchange Commission, to ensure the laws are being observed.

One of the most notorious offences, and one of the most difficult to stop, is insider dealing. This is the use of privileged, inside information about a company to make money from its securities. The ‘insider’ might buy shares just before the company announces an increase in profits. Or sell them before it announces a loss.

In 1986 an eminent New York financier, Ivan Boesky, was charged with investing in stocks using confidential information about company mergers. He had paid huge sums for the information, on one occasion giving $700,000 in used notes to a banker in a Wall Street alley.

Boesky made a detailed confession which resulted in the arrests of bankers and businessmen in both New York and London. He was sentenced to three years in prison.