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Research analysts have gained significant attention over the years for their predictions of Apple's production plans, with "channel checks" frequently being cited as the basis for their assessments. These checks involve receiving information, often secondhand, from representatives of Apple's manufacturing partners.

The Wall Street Journal reports, however, that the U.S. Securities and Exchange Commission (SEC) is now investigating the legality of such channel checks, looking to determine whether some of the tactics amount to insider trading as the analysts share the non-public information with their clients.
Where once insider-trading cases were built around a single tip about a merger, for example, prosecutors appear to be broadening into new territory. They are examining how arcane, confidential, but presumably routine data may move company stocks.

"Insider trading basically comes down to where you know or ought to know that the person from whom you're getting this information has a duty to someone else to keep it confidential," said former Securities and Exchange Commission Paul Atkins in a video interview with The Wall Street Journal. "If you go in and pay the mail clerk to give you special information, that's not proper."
While the investigation appears to be a broad look at a number of small research firms, the report focuses on those digging up information on Apple, which has become a prime target due to its financial performance, stock growth, and the company's secrecy about its own plans.
Such channel-check information has become crucial to Apple traders, who have come to expect a weekly dose of information from channel checks about Apple's iPad and iPod businesses.

Analysts relay the information - known in the business as "build plans" - weekly to savvy technology investors, who often dart in and out of heavily-traded Apple shares. Such information has grown to be almost as important as Apple earnings, able to move shares throughout the quarter.
The SEC is also taking a look at "expert network" consultants, who seek to connect investors with employees of certain companies for a fee, and whether those consultants have shared inside information to their clients. No analysts or consultants have yet been charged with any wrongdoing, but the SEC is clearly interested in learning more about their tactics and business practices.

Article Link: U.S. Regulators Investigating Research Analysts Over 'Channel Checks'
 

Michael73

macrumors 65816
Feb 27, 2007
1,081
39
Based on the definition in the article, many of the "channel checks" would seem illegal. That is assuming that many, most or all of Apples production partners are under confidentiality agreements.

I suppose in order to prosecute, you'd have to be able to prove intent and have a motive but even that might not hold up. If you're company has signed an NDA, then no matter who is leaking the information and for whatever reason is in violation and subject to prosecution.
 
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Tilpots

macrumors 601
Apr 19, 2006
4,192
71
Carolina Beach, NC
Watch your back, arn. Watch your back. :cool:

Really though, its about time the feds stepped in on this. I'm sure Apple and any other big companys have been giving the SEC an ear full as they are being investigated for other matters. If you're going to prosecute these tech companies, you need to protect them, too.
 
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pablorph

macrumors newbie
Jul 25, 2008
4
1
Alabama
Agree

I agree this is definitely insider trading. What if I bought shares directly based on any of these channel checks? I bet they would find (fine) me in a sec. (SEC)!
 
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rdowns

macrumors Penryn
Jul 11, 2003
27,397
12,513
Good job SEC. This will make us forget your incompetence in the Bernie Maddoff case. :rolleyes:
 
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leukotriene

macrumors regular
Aug 1, 2008
148
0
Watch your back, arn. Watch your back. :cool:

Really though, its about time the feds stepped in on this. I'm sure Apple and any other big companys have been giving the SEC an ear full as they are being investigated for other matters. If you're going to prosecute these tech companies, you need to protect them, too.

I don't want to put words in arn's mouth, and I'm sure you were kidding, but what arn is doing is completely legal. The SEC is interested in people who are actually doing the channel checks. To my knowledge, arn just reports the news.
 
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shartypants

macrumors 6502a
Jul 27, 2010
922
60
Anyone who profits this way should be shut down. I don't really think this will have any effect on the market volatility but still good to do, imo.
 
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JeffDM

macrumors 6502a
Sep 16, 2006
709
9
It does seem like these figures are dancing on the line at least, if not skipping over and back again. But it sounds like a complex issue too.
 
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ashoka8350

macrumors member
Jan 2, 2008
81
0
Let us see:

If the Wall Street Apple Analysts makes these comments to manipulate the AAPL stocks so that his company or his associated company tries to take advantage of the situation either to decrease or increase the value of the AAPL stocks, to gain monetary advantage is certainly illegal. May be that is what SEC is after.

just my 2 cents.
 
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schmidm77

macrumors member
Jun 15, 2004
56
0
insider trading is a good thing

People are too focused on insider trading from the angle that it is unfair, but the fact is that insiders being able to act on information they possess causes that information to be known by outsiders much faster than it would otherwise.
 
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faith4more

macrumors regular
Apr 15, 2010
100
0
This goes on with all companies and it should be stopped. Wall Street analyst have been able to do "legal" insider trading for years.
 
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alent1234

macrumors 603
Jun 19, 2009
5,688
170
i used to read some of the reports years ago and these people actually go to china to talk to the manufacturing companies. since they are Chinese based, it's not insider trading
 
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newagemac

macrumors 68020
Mar 31, 2010
2,091
23
I don't want to put words in arn's mouth, and I'm sure you were kidding, but what arn is doing is completely legal. The SEC is interested in people who are actually doing the channel checks. To my knowledge, arn just reports the news.

Unless arn is making stock moves first and then later reporting the news to the mere mortals.

Muwhahahahaaaaa! (said in best evil laugh while rubbing hands together profusely)
 
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ldkaplan

macrumors regular
Jul 8, 2002
206
0
N. Georgia
This is bad for Apple. Apple receives an insane amount of free marketing through these 'channel checks'. Occasionally, it goes too far (the Gizmodo scandal), but generally it works in favor of Apple.

They also get free market research by reading responses to articles that speculate on the next gen hardware.

I'm sure Apple plays this on both sides with the SEC...like a pop star and the paparazzi.
 
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RalfTheDog

macrumors 68000
Feb 23, 2010
1,537
348
Lagrange Point
I think I am safe as I base all my predictions and stock purchases off of time travel and professional psychics (or was that psychotics).
 
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gnasher729

macrumors P6
Nov 25, 2005
17,978
5,530
Watch your back, arn. Watch your back. :cool:

Really though, its about time the feds stepped in on this. I'm sure Apple and any other big companys have been giving the SEC an ear full as they are being investigated for other matters. If you're going to prosecute these tech companies, you need to protect them, too.

I know you are joking, but anything that gets published here is then publicly available information. So if someone posts confidential information about Apple, they might be in trouble with Apple for a breach of an NDA, or for giving away a trade secret, but they cannot not be in trouble with the SEC for insider trading.

For example, there was information published about iPhone 4 that shouldn't have been published. That information was now available to the public. If you bought or sold shares based on that information, that would be no insider trading. But if whoever published it had kept the information to themselves and bought or sold Apple shares based on the information, that would be insider trading.


This is bad for Apple. Apple receives an insane amount of free marketing through these 'channel checks'. Occasionally, it goes too far (the Gizmodo scandal), but generally it works in favor of Apple.

No, Apple doesn't get any free marketing from this. The SEC is talking about someone who bribes someone in China to find out exactly how many iPhones Apple is building, and then not telling anybody but buying or selling Apple shares depending on the numbers. The public doesn't hear about it; no free marketing.
 
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ds4281

macrumors newbie
Aug 20, 2008
5
0
Waste of Time

This is a waste of time by the SEC. This has been done for decades by analysts and it is what you pay for when you sign up for their services. Anyone can have access to it if they want to and in fact most of it can be had for free if you look around for a few minutes yourself.

Besides, the channel checks are not always accurate. I don't know of anyone who buys or sells huge chunks of stocks on channel news. What really moves stocks is the hard data that comes every quarter from the company itself - earnings, margins, and guidance.
 
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faith4more

macrumors regular
Apr 15, 2010
100
0
This is a waste of time by the SEC. This has been done for decades by analysts and it is what you pay for when you sign up for their services. Anyone can have access to it if they want to and in fact most of it can be had for free if you look around for a few minutes yourself.

Besides, the channel checks are not always accurate. I don't know of anyone who buys or sells huge chunks of stocks on channel news. What really moves stocks is the hard data that comes every quarter from the company itself - earnings, margins, and guidance.

You cant get that information until the analyst has gotten all his friends, grandma, uncles aunts and via untraceable offshore accounts to buy or sell stock stock depending on the info being good or bad.. Then they tell the world about the channel check pushing the stock up or down. This has been going on a long time but needs to stop. Once the average guy gets the information it has already been disseminated among the powerful. Channel checks do move stocks unless the info was on par with expectations.
 
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ten-oak-druid

macrumors 68000
Jan 11, 2010
1,980
0
Maybe the silly verizon iphone rumors (pre-2012) will end. I'm convinced these come out to make small swings in stock prices for large players in the market.
 
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