Business

Buffett has some explaining to do ahead of AGM

Just in time for Warren Buffett’s release of his 2014 annual letter to shareholders this coming Saturday, Oracle-watchers last week were privy to another iteration of the “Buffett Rule.”

No, not the one where he wants Americans who are trying to build a nice nest egg one paycheck at a time to pay far more in taxes than he does on his accumulated billions, but a broader interpretation of his quiet hypocrisy — that is, “Do what I say, not as I do.”

In this case, the issue for Buffett and his Berkshire Hathaway came as the company was caught with its pants down for selling market-moving information to high-speed traders.

The down-home conglomerate that owns everything from a brick maker to a candy company also happens to own Business Wire, a disseminator of earnings reports, corporate announcements and regional Federal Reserve surveys.

Thanks to our colleagues at the Wall Street Journal, it came to light that Business Wire customers were paying thousands of dollars a month to get these releases a fraction of a second ahead of the rest of us. Highlighting such split-second advantages may sound like splitting hairs, but for the high-speed traders throwing tens of millions at a single trade, it is tantamount to gaming the system.

Last week, Business Wire bowed to pressure from New York’s attorney general and said it would halt its direct feed to high-frequency traders, but added that it was doing so only because the Journal article “may have caused some misperceptions, and that was of deep concern to us.” Misperceptions? Malarkey.

Surely Warren Buffett, more than anyone else on the planet, knows that the release of “material non-public information” even for a nanosecond constitutes an advantage — if not outright insider trading.

By stopping the practice now, Buffett is likely trying to clear the air before Buffett Season — those eight weeks or so between his shareholders letter and his annual meeting/lovefest in Omaha.

We can only hope that this year someone will ask him why he was making so much money by selling market-moving information to those who had the resources to pay for it and the technology to exploit it.