Crackdown on 'Insider Trading 2.0'

JPMorgan, Goldman, and 16 other firms agree to end analyst previews for elite clients.

JPMorgan Chase & Co. and Goldman Sachs Group Inc. were among 18 financial firms that agreed to stop participating in some surveys of analyst sentiment while New York investigates early access to the information.

The firms will stop answering analyst surveys by “certain elite, technologically sophisticated clients” seeking to use the information for trading, according to New York Attorney General Eric Schneiderman. The interim pacts are part of efforts to combat advantages secured by investors that get to see potentially market-moving data before other traders.

The conduct “does not fit into the classic framework of insider trading,” Schneiderman said at the time in an interview on Bloomberg Television’s “In the Loop with Betty Liu.” “It’s something we’re now calling insider trading 2.0. This is stuff that is not hard information. It’s just front-running what the analysts are saying.”

Under the BlackRock survey, data sought included analyst views on the likelihood of a surprise to their forecast earnings estimate and the possibility a company they cover would be acquired in a merger, according to the agreement.

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