Consulting Leaves Room for Insider Trading

If you read today's Wall Street Journal (or any business news for that matter), there is big news in the hotel industry. Blackstone Group is to acquire Hilton Hotels for $18.5 billion plus debt. Wow. Chances are there were both companies employees working on the deal, but also financial consultants and planners outside of Blackstone and Hilton. Because consultants must look at all aspects of a transaction and whether or not it is the right decisions for the parties involved, they may know information before it is available to the public.

As a business student, you probably know that no one is allowed to act on this inside information (ie. acquire or sell off shares of stock). That would be insider trading and it's illegal. Consultants are tempted in all sorts of situations with information that could make them very wealthy, but it is their job to uphold the moral standards of a business professional. All consulting firms confirm independence by making sure that an employee does not own securities of the clients they work on and that close relatives are not employed by clients. This interaction could create sticky situations for all involved and after all, no one wants to be the next Martha Stewart.