The Economist drafted a typically cheeky and wonderfully entertaining gloss on the current state of expert networks. For the most part, they get it right, but they also get it wrong in important ways.
No, Wini Jiau is not a player in the expert network industry. She was a consultant whose information was the envy and downfall of the investment community and is alleged to have persistently acquired and sold material non-public information to a loose band of investors. The Economist would have done better to mention Don Chu, who did work at Primary Global and did confess to trading in inside information. Wini was just a consultant.
Yes, because of what may eventually be described as a systematic conspiracy by Primary Global to trade in inside information through a vast network of corrupt insiders, both alleged and confessed, eyebrows have been raised. Regulators, investors, and limited partners have awakened to the risks inherent in any research activity.
No, these risks are not particular to expert networks. Indeed, an example elaborated by the Economist actually suggests the opposite – that expert networks might serve as a kind of prophylactic to the kinds of funny-business to and for which we have recently seen many confessed and convicted.
The Economist suggests that compliance protocols and procedures are no match for those determined to do wrong. The piece conjures a cautionary tale of an investor, having been introduced to an expert through a network, rerouting their activities through an independent consulting relationship, “which enables them to buy tips without GLG ever knowing.”
It’s certainly possible, but isn’t it also an argument for expert networks. If expert networks are so darn difficult about compliance that an adroit and corrupt investor would choose to circumvent them, then shouldn’t “compliance chiefs” relish the chilling effect expert networks have on their employees’ baser instincts?
I did enjoy, however, their clever turn of phrase to a conclusion. Indeed, Rajat could have used some expertise in discretion. Though perhaps he could have learned it through the policies, procedures and systems of an expert network.
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