SEC Investigating Analyst Channel Check Practice

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The U.S. Securities and Exchange Commission has launched an investigation into the analyst practice of seeking information on parts channel flow to predict company sales and manufacturing plans. The investigation is taking an especially close look at how analysts are obtaining their channel information about Apple products, according to the Wall Street Journal.

Channel checks, which Wall Street analysts rely on to gauge where Apple is headed with its product inventory and new designs, may turn out to be considered insider information by the SEC. The reasoning, according to the SEC, is that the data analysts are gathering nearly every day isn’t supposed to be publicly available.

SEC: Analysts may be gathering insider info on Apple

“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,” commented Paul Atkins, former SEC Commissioner. 

Assuming the SEC decides channel checking constitutes insider trading, that will put a crimp in analyst’s efforts to keep on top of Apple typically secret game plans. Since Apple is known for keeping quiet about upcoming product releases, analysts regularly turn to parts channel resources to figure out what the company is working on.

The investigation could potentially turn into a bigger headache for analysts if the SEC decides their involvement in looking at parts channels is insider trading because they could face criminal and civil charges, too.

So far, no one has been charged with any wrong doing as part of the investigation.

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