I can't quite believe I am doing this - because I loathe Bill Ackman with a passion. Mr Ackman in the presence of one of my clients told the world that Bronte would blow up. I had the temerity to disagree with him on two stocks (Herbalife, Valeant). However my positions were much smaller than his in both stocks - so it was rich for him to suggest that I was risky.

Whatever: I think today's charging of one of his former analysts and his roommate for insider trading in Herbalife is a bad case of SEC overreach.

US insider trading rules first require that someone breach a position of trust regarding the company that is being traded. In the Mark Cuban case - which the SEC ultimately lost on appeal - Mark Cuban was told by the CEO of Mamma.com that the company was going to need to do a secondary offer. Mark Cuban sold his stock and was charged with insider trading.

The whole case swung on whether Mark Cuban had agreed to be bound by the CEO into not trading the information he was given. The SEC could not prove that he had so agreed and so Mark Cuban had not breached any position of trust he had been put in by the company and hence was not guilty of insider trading. I blogged extensively about the Mark Cuban case here and again when the SEC lost the case here.

In the recent Herbalife an analyst at Pershing Square knew in advance that Pershing was going to do its "hit piece" on Herbalife. The analyst had a duty to Pershing Square but did not have any duty to Herbalife and was not an insider in Herbalife.

The analyst tipped his roommate who traded the stock. The roommate made about fifty grand.

Both were charged with insider trading - but neither was in a position of trust with respect to Herbalife and neither had inside company information.

As stated the analyst clearly had a duty to Pershing Square - and I think it is incumbent on Bill Ackman to sue his analyst if the analyst acted contrary to his obligations to Pershing. But it is not a case which should involve the SEC. It is not insider trading.

My guess is that the SEC put Bill Ackman through hell on this one.

For once - and I suspect it is only once - I am on his side.