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From Kirsten Bischoff, Opalesque New York:

While many firms took steps to provide greater levels of transparency to investors in order to overcome the backlash of uncovered frauds at the end 2008, it seems that despite these changes and stronger industry wide performance, 2009 will end on a similar negative note with the rapidly widening scandal of insider trading. Although by all accounts the team at Galleon was able to rapidly exit remaining positions for redeeming investors, and reportedly secure some gains during its final month, investors are acutely aware of how quickly losses can occur if a manager comes under investigation and/or is forced to close a fund in a distressed situation.

Investors learned that fraud could be better protected against through better, ongoing due diligence processes. However, determining one’s exposure to the risk of investing in a manager that is participating in illegal insider trading activity is much more difficult. The SEC may be able to secure a warrant to tap telephones and follow electronic mail trails – but investors can only evaluate a manager’s investment decisions by the information the manager provides. It is difficult to determine if a manager is acting on non-public information without the measures available only to regulatory agencies….or is it?

That is the answer New Jersey-based quantitative investment technology firm ......................

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