Over the weekend, we learned the SEC was launching a major crackdown on insider trading. On Monday, they raided the offices of three hedge funds. Good!
After the Global Financial Crisis, the 52% drop in the stock market, and the mysterious Flash Crash in May, it is no wonder that retail investors are distrustful and still on the sidelines, missing this year’s rally.
To restore confidence, retail investors must be assured there is a level playing field, and the SEC knows this. After the earlier market crash, G-Men went after the executives of Enron, WorldCom, and many other companies. Retail investors have short memories and soon returned to the market after the prosecutions.
Because the last crisis was financial in nature, we can expect the G-men to focus on the financial firms, which will slime all of them. I certainly don’t plan to increase my exposure to any financial stocks.