Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, May 10, 2007

More on Dow Jones Insider Trading Charges

Since the SEC's charge of insider trading in Dow Jones stock against a Hong Kong couple, the focus has been on who knew of Murdoch's bid and when.  The Wall St. Journal constructs a timeline which provides a good illustration of why leaks of big deals are so commonplace.  On March 29, Murdoch had breakfast with CEO Zannino and made the first overture, without naming a price.  Zannino immediately told Dow Jones GC, outside counsel, and several key Board members about the conversation.  Soon thereafter, Murdoch had a conversation with another Board member, who advised him to put it in writing.  A special meeting of the Board was then called for April 13 -- this is the date when the Hong Kong couple began their purchases.  The board received a written offer on April 17, and the public announcement was made on May 1.  Nothing about any of this sounds improper, but think of all the investment bankers, attorneys, journalists, executive assistants, secretaries, etc. who may have heard something about the deal prior to the public announcement.  See WSJ, Murdoch Approached Dow Jones March 29.  The Hong Kong connection is focusing attention on its business community, described as "clubby," and its system of securities regulation, where no one has been prosecuted for insider trading since it became a crime in 2003.  See NYTimes, Prominent in Hong Kong and, Perhaps, in the Dow Jones Inquiry; WSJ, SEC to Lift Veil on Clubby Hong Kong.

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