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Next Up, A Crackdown On Outside-Expert Firms

Publication Date: 
May 11, 2011
Source: 
The New York Times Dealbook
Author: 
Evelyn M. Rusli

Professor Robert Weisberg is quoted by Evelyn M. Rusli in The New York Times Dealbook regarding what the expert network industry will need to do in order to survive following recent insider trading cases.

With the government securing a conviction against Raj Rajaratnam of the Galleon Group on Wednesday, federal prosecutors will shift their focus to expert networks — the intricate web of money managers, corporate executives and consultants at the center of another wave of insider trading cases.

Over the last few years, the Justice Department has built dozens of insider trading cases. The government’s effort has sent shivers through the hedge fund industry, the influential investors that have figured prominently in an investigation into Wall Street.

...

“If this little industry is to survive, it’s going to have to glow with virtue, which means a lot of self-regulation,” said Robert Weisberg, a professor of criminal law at Stanford.

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Compliance is a heavy burden for the smaller players. There are only about 40 expert network firms in the United States, according to Integrity Research, and only a handful have annual revenue in excess of $40 million. Given the costs associated with compliance, Professor Weisberg predicts that many smaller firms will have to team up with their larger brethren or shut down.