Bruce Carton of Securities Docket wrote a very interesting article called Who’s Checking Your Channel? The article highlights the practice of “channel checking” which has been something investment analysts have done for a long time. Now it appears that our government is trying to decide whether channel checking is actually illegal insider trading.
I see channel checking as independent research. People are looking into a company, doing things like looking at customer, supplier, employer, and competitor data, in order to find out how the company is really doing. It’s a fact that most of the information about a company comes from the company itself, and that public companies have a vested interested in making things look rosy. It is only through independent research that outsiders have a chance of finding out some of the not-so-rosy things.