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SEC Will Consider Bounty for Squealers on Inside Trades

January 17, 1986

WASHINGTON (AP) _ The Securities and Exchange Commission will consider a bounty system of rewards for people who squeal on inside stock traders, chairman John S. R. Shad said Friday.

Interviewed on Cable News Network’s ″Moneyline″ program, Shad said the SEC will conduct a public roundtable on Feb. 19 to discuss insider problems with ″heavy hitters″ from the stock exchanges, investors, corporate executives and others.

Insider trading is defined as trading that takes place based on non-public information about possible mergers and other business activity.

″We have a vigorous enforcement effort, and we’re looking into the possibility of paying rewards to informants who provide us with information on those spreading false rumors,″ SEC spokeswoman Mary McCue quoted Shad as saying.

She said the SEC is also concerned about any kind of rumor, false or true, that is spread on an insider-trade basis.

Shad noted that other federal agencies have similar programs of rewarding informants. For example, the Internal Revenue Service has a claims system in which a person can request a reward for turning in others if the information leads to the collection of additional taxes.

Shad was asked if any SEC reward could be likened to a ″bounty″ and he replied that could be the case. He said the agency’s staff is investigating it, although the commission as a whole has not yet made a policy decision.

Under the insider trading sanctions law, the commission can ask the courts to levy fines up to three times the profits made or losses avoided.

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