Tailgating

Definition

Tailgating is when a driver drives behind another vehicle while not leaving sufficient distance to stop without causing a collision if the vehicle in front stops suddenly.


Tailgating

What is ‘Tailgating’

Tailgating is when a broker, financial advisor or other sort of investing agent buys or sells a security for a client, and then proceeds to make the same transaction for himself. While tailgating is not an illegal practice, it is frowned upon and considered unethical by professionals in the field.

Explaining ‘Tailgating’

Tailgating is legal; however, it is also a highly unethical act. It is easily confused with two other investment-related actions, both of which are illegal. Investors and practitioners should be aware that, while it may appear similar, tailgating is not the same thing as the practice of insider trading. While insider trading occurs when the purchase or sale of a security arises from confidential, or proprietary, information, tailgating takes place when the broker takes a cue or trade request from the client with the client’s own information, and then places the same trade for his own account based on the information the client provided.

Example of Tailgating

Tom is an investment advisor for his client, Bill. Bill contacts Tom and provides him with information that Company A is planning to announce a reorganization of its management structure, which includes bringing in new managers to improve overall performance. With this provided information from Bill, Tom agrees with Bill the new management will most likely succeed in improving Company A’s performance, and therefore increase in profitable investments. After purchasing the 1,000 shares for Bill as he requested, Tom proceeds to purchase another 1,000 shares for himself.

Further Reading

  • Drinking games, tailgating, and pregaming: Precollege predictors of risky college drinking – www.tandfonline.com [PDF]
  • Tailgating and pregaming by college students with alcohol offenses: Patterns of alcohol use and beliefs – www.tandfonline.com [PDF]
  • The relationship among alcohol consumption, tailgating, and negative consequences – www.tandfonline.com [PDF]
  • The culinary and nutritional aspects surrounding the newfound sport of tailgating – www.tandfonline.com [PDF]
  • Enduring involvement of tailgating college football fans: the influence of demographic factors – go.gale.com [PDF]