“Here’s a twist in the government’s recent crackdown on insider selling: One of the main regulators tasked with policing the illegal practice may be instructing its employees to do just that.”

“Securities and Exchange Commission employees regularly sell shares of companies in their personal portfolios that come under investigation by the agency before those investigations become public. Indeed, in many instances such employees are required to do so, and the sales are approved by the SEC’s compliance staff. What’s more, the advanced selling appears to allow SEC employees to systematically beat the market.”

“The SEC’s questionable stock-trading policy for its employees came to light on Monday following the publication two weeks ago of a study of the trading records of SEC employees by an Emory University accounting professor and a graduate student. The study, which looked at 3,500 trades made by SEC employees during a little over a two-year period, found that SEC employees weren’t any better at picking stocks than the rest of us. But they were better at selling them. According to the study, the stock sales allowed SEC employees to “’systematically dodge the revelation of bad news in the future. This fact pattern is consistent with the greater informational advantage related to potential enforcement activities that employees of a regulator are likely to enjoy over other market participants.’”

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