Via Fraud Files Blog.
Bruce Carton of Securities Docket wrote a very interesting article called Who’s Checking Your Channel? The article highlights the practice of “channel checking” which has been something investment analysts have done for a long time. Now it appears that our government is trying to decide whether channel checking is actually illegal insider trading.
I see channel checking as independent research. People are looking into a company, doing things like looking at customer, supplier, employer, and competitor data, in order to find out how the company is really doing. It’s a fact that most of the information about a company comes from the company itself, and that public companies have a vested interested in making things look rosy. It is only through independent research that outsiders have a chance of finding out some of the not-so-rosy things.
The channel checker is out there kicking tires, trying to find out information or trends before they are widely know. The information is reported back to the entity that paid for the research, and they may trade on that independently developed information.
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