You’ve read about them here and many other places: The “channel checks” conducted by research analysts to prognosticate what Apple may be doing in the future. Now, the questionable practice has fallen under the watchful eye of the Federal government.
MacRumors is reporting that the U.S. Securities and Exchange Commission (SEC) may be setting their sights on the practice of “channel checks,” frequently used by research analysts (together with second-hand information from manufacturing partners) to make predictions on Apple’s future plans.
According to The Wall Street Journal, the SEC is now investigating the legality of such checks 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,” the report noted. “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."
The investigation appears focused on research analysts who dig up information on Apple -- a frequent target for such channel checks due to the company’s secrecy regarding future plans, as well as their recent financial performance and stock growth.
“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,” the report revealed. “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.”
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