Last Monday's Wall Street Journal featured an article that illustrated a trend in investment firms obtaining information through the Freedom of Information Act to make strategic decisions. In particular, the article highlighted SAC Capital Advisors contacting the Food and Drug Administration for information regarding a drug from Vertex Pharmaceuticals. SAC was able to use this information and purchase 13,500 shares of Vertex, whose stock rose by over 60% in a single day when further benign results were announced.
According to the United States Department of Justice, Freedom of Information Act "is a law that gives you the right to access information from the federal government." Signed into law in 1966, the Act "provides individuals with a statutory right of access to certain federal agency records." There are exemptions, and one of which is concerned with "business trade secrets or other confidential commercial or financial information."
While investors typically don't solely rely on the information from the Act, the valuable piece of information "helps them to piece together investment strategies or evaluate a company's prospects." Over 650,000 requests were received in fiscal year 2012, out of which over 93% were released in full or part. Within the different agencies, Department of Homeland Securities overwhelmingly received the most requests.
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