Short sellers getting inside info on CEO share sales?

July 22, 2008 | By Jim Kim

These days, one mark of success as an academic in finance is whether your work will form the basis of an enforcement action. We've seen several studies lead to big investigations. The most recent example is options backdating. This goes all the way back to order handling rules in the 1990s. Are we set for a reprieve with short sellers? MIT and University of Toronto professors have found that short sales spike before public reports of large sales by insiders, according to Financial News Online. They suggest that front-running by short sellers is the main reason. The short selling starts in earnest about two days before the report is due to be made public. Several scenarios are suggested: executives telling friends and family of the impending event, traders jumping ahead of CEO trading instructions, and traders tipping of hedge fund clients as a favor.

For more:
- here's the Financial News Online article