Fang is a member of an expert network, a collection of specialists that serves as a kind of research institute for investors willing to pay hefty subscription fees. For years, these networks operated - legally - in the shadows of the financial industry, but in recent months they have been thrust into an unwelcome spotlight by a series of insider trading scandals.
The problems for the industry arose when some consultants - and their investor clients - crossed a bright legal line by disclosing confidential information about a company’s business, and trading on that for profit. The insider trading scandal involving New York hedge fund Galleon Group is the most prominent example: Among the dozens of convictions and guilty pleas in the case, 10 people had connections to an expert network firm, whether as a consultant, employee, or client.
In November, in a separate case, a French doctor pleaded guilty in US court to leaking information to a hedge fund manager about a drug trial in which he was involved. The hedge fund trader also pleaded guilty to related charges.
In Massachusetts, Secretary of State William F. Galvin last year accused a hedge fund manager of insider trading for allegedly using confidential information he received from doctors working for the expert network Guidepoint Global LLC of New York. Galvin alleged three doctors involved in the clinical trial of a cancer drug provided inside information to the hedge fund manager while they were consultants for Guidepoint.
Guidepoint declined to comment.
No one from MedaCorp has been implicated in an insider trading case. But the firm’s parent, Boston investment bank Leerink Swann, is under investigation involving trades in the stock of one of its clients by one of its MedaCorp customers, the giant New York hedge fund SAC Capital.
