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Circle of Friends: The Massive Federal Crackdown on Insider Trading---and Why the Markets Always Work Against the Little Guy Hardcover – July 2, 2013

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Circle of Friends: The Massive Federal Crackdown on Insider Trading---and Why the Markets Always Work Against the Little Guy + The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System
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Editorial Reviews

From Booklist

Gasparino describes the involvement of government officials in insider-trading investigations up to early 2013. He begins in mid-2007, when we meet a little-known but successful trader who is told by the FBI that he faces jail unless he confesses and helps the government catch others. Often suspects are identified by “another cooperator.” The author weaves his tale like a novel, except it is a well-researched account of events using interviews, names, and dates. Instead of small firms, the FBI became convinced that “a massive circle of friends existed on Wall Street . . . mainly at some of Wall Street’s biggest trading outfits, known as hedge funds who were using and trading on insider information.” Gasparino tracks the government’s successes, failures, and work in progress, with major violators such as Raj Rajaratnam jailed while the “white whale of Stamford” continues in their sights. He concludes that “no one who studies the markets and financial systems has any doubt . . . they will repeat the same practices that led to the 2008 collapse.” Very informative. --Mary Whaley

Review

“’Circle of Friends’ is an insightful recap of how we got to the place where insider trading became the favorite target of regulators, and is a good guide on where it all goes from here as investigators continue to pursue SAC Capital Advisor’s Steven A. Cohen.” (New York Post)

“Circle of Friends reads like a page-turning thriller.” (Connecticut Post)
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Product Details

  • Hardcover: 384 pages
  • Publisher: HarperBusiness; 1 edition (July 2, 2013)
  • Language: English
  • ISBN-10: 0062096060
  • ISBN-13: 978-0062096067
  • Product Dimensions: 6 x 1.2 x 9 inches
  • Shipping Weight: 1.2 pounds (View shipping rates and policies)
  • Average Customer Review: 3.9 out of 5 stars  See all reviews (33 customer reviews)
  • Amazon Best Sellers Rank: #176,440 in Books (See Top 100 in Books)

More About the Author

Charles Gasparino is an on-air editor for CNBC, a columnist for the Daily Beast and the New York Post, and a freelance writer for Forbes and other publications. He previously wrote for Newsweek and the Wall Street Journal, where he covered issues on Wall Street, including pension funds, mutual funds, and regulatory issues. Gasparino has won numerous business journalism awards, and he is the author of Blood on the Street, which was a BusinessWeek bestseller and was listed by Barron's as one of the best business books of 2005, and King of the Club, which was named one of the best business books of 2007 by Library Journal.

Customer Reviews

Most Helpful Customer Reviews

24 of 27 people found the following review helpful By C. Overgaard on July 6, 2013
Format: Hardcover Verified Purchase
Gasparino has written a thorough, comprehensive review of the federal government’s efforts to deal with insider trading – the use of ill begotten non-public information to buy or sell securities which, when the information becomes publicly available, will rise or decline in price. He notes that while prostitution is considered the oldest profession, insider trading has to be at the top of the list of the world’s oldest economic crime.

In the aftermath of the Great Depression, during which insider trading was very prevalent and regarded as a fact of life, President Franklin Roosevelt chose as the person to clean things up, someone who had profited handsomely from securities speculation. Joseph P. Kennedy, the father of President John Kennedy. Kennedy was chosen to be the head of the newly created Securities Exchange Commission that administered the Securities Act of 1933 and the Securities Exchange Act of 1934. Section 10(b) of the 1934 Act made it unlawful to use or employ, in connection with the purchase or sale of a security, “any manipulative or deceptive device or contrivance in contravention of” rules and regulations of the SEC. The principal such rule was Rule 10(b)(5).

But it was several years before the Rule was widely used and its parameters defined by the Supreme Court. Although the SEC can only initiate civil actions, federal law enforcement officials, such as U.S. Attorney Rudy Giuliani, used criminal statutes to go after high profile investors who used misappropriated inside information.

Gasparino goes into considerable detail about criminal insider trading cases in the last fifteen years. Much of his reporting follows the work of two teams of FBI agents who tried to induce suspects to become informants.
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14 of 16 people found the following review helpful By Alan F. Sewell on July 13, 2013
Format: Kindle Edition Verified Purchase
This book interested me because I've been in the market for 37 years. I earn my living by investing. I was once contacted by a person claiming to have privileged information about a company on the basis of an alleged friendship with a CEO. I responded by telling the fellow to never call me again.

Insider trading is thus one aspect of the stock market, which is a mixture of legal, quasi-legal, and illegal components.

A part of the market is rational. It operates on legal and ethical principles and behaves the way a long-term investor wants it to, which is to gradually increase the value of a portfolio over a period of years.

Another part of the market is non-rational. It is based on the computer driven trading that churns the markets up and down for no reason at all --- those of billions of high frequency trades, most of which are fake orders designed to "sniff" what other high frequency traders are doing.

Another part of the market is based on quasi-legal manipulation, such as hedge funds or the trading desks of an investment bank taking a large short position in a stock and then starting an unfounded rumor to scare investors into selling. After the "big boys" manipulate the stock down as far as they can, they cover their short positions for a profit, go long, and then run the stock back up. Wall Street firms call this manipulative rumor mongering "investment analysis." They even peddle their "investment analysis" for fancy fees, thereby getting paid yet again for advising their clients to take the losing sides of trades.

Another part of the market is an implicit conspiracy whereby institutional investors act in concert without explicitly cooperating.
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6 of 6 people found the following review helpful By Robert B. Lamm on August 3, 2013
Format: Hardcover
I have read two of Charles Gasparino's previous books and liked both of them; in fact, "The Sellout" is my personal favorite on the root causes of the 2008 financial collapse; it's thorough and well thought out, and I've kept it in my library.

In contrast, "Circle of Friends" is a hodgepodge of incidents about the government's pursuit of insider trading with only one central thesis: that the pursuit has distracted the SEC and prosecutors from catching and punishing the people that caused the collapse. I disagree with that thesis; among other things, the actions that led to the collapse were to some extent stupid but not criminal, and even those that were criminal would have been challenging to prove to a lay jury. I nonetheless was willing to be persuaded otherwise. However, Gasparino offers not one whit of proof to support his theory, other than to repeat over and over again that the government was pursuing the wrong bad guys.

I was also willing to hear an argument that insider trading should not be prohibited. As someone who's practiced securities law for 40+ years, i strongly disagree, and the argument has been made before, but - again - I was willing to listen. However, he never says that. So we're left with his theory, which suggests that the guys the government was pursuing were bad guys, at least for the most part, but they should have gotten away with their crimes (I guess; I can't figure out what else his point might be).

As noted above, the book is a hodgepodge; it's as though it's a series of articles that were thrown together in a book, and perhaps that's what it is, but it's really not necessary to tell me twice or three times what short selling is, and he frequently repeats things that he's already told us.
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Circle of Friends: The Massive Federal Crackdown on Insider Trading---and Why the Markets Always Work Against the Little Guy
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