The Securities and Exchange Commission is shaking up its enforcement division, establishing five priority areas, including one pointed directly at hedge funds and private equity firms.
Dec
11
One year ago today, Bernard Madoff was arrested and charged with securities fraud in a $50 billion Ponzi scheme that affected thousands of investors. It was an investment scandal that rocked Wall Street and raised concerns and awareness on all levels. As a result, stricter regulations and much needed reforms and due diligence on how the Securities and Exchange Commission intends to respond to and review allegations of fraud have been implemented.
Briefly stated those reforms include:
Dec
2
The SEC is clearly continuing their interest in insider trading as they have reportedly sent dozens of subpoenas to hedge fund managers and brokers. From FINalternatives:
The regulator has sent at least three dozen such subpoenas to hedge funds and brokerages, The Wall Street Journal reports. According to the newspaper, at least some of the managers receiving the subpoenas were surprised by their scope and is causing fear that the SEC may come down hard on what have become common practices in the industry.
Nov
25
Raj Rajaratnam seems to have a lot in common with his brother, Rengan Rajaratnam. They have the same initials R.R., both have managed their own hedge funds and BOTH have been involved with investigations for insider trading. Based on papers filed yesterday in New York federal court, Raj disclosed that he was deposed by federal authorities in 2007 in an insider-trading investigation involving “an unrelated hedge fund”, which was Sedna Capital Management and happened to be managed by the other R.R., Rengan Rajartnam as noted in an article in the Wall Street Journal.
Rengan managed Sedna Capital Management until late 2007, which is said to have been shut down after suffering losses and the costs of complying with the SEC investigation. It appears that the Galleon Group was requested to provide documents (about four million of them) in conjunction with the 2007 SEC investigation of Sedna Capital Management. The Wall Street Journal article also states that the status on the investigation of Sedna Capital Management isn’t clear, but based on what we know about Raj, it is probably not good.
Nov
6
The Wall Street Journal is reporting that the government’s investigation into insider-trading is being built on information from five cooperating witnesses, some of whom received information from investors and companies that haven’t been originally charged in the probe, potentially broadening the case.
The complaint released Thursday named two additional cooperating witnesses in the government’s insider-trading case against Raj Rajaratnam, founder of hedge fund Galleon Group: Steven Fortuna, of Boston hedge fund S2, and Gautham Shankar, a proprietary trader at Shottenfeld. Mr. Rajaratnam has denied wrongdoing. The men, join three others — Roomy Khan, Ali Far and Richard Choo-Beng Lee — who were previously identified as cooperating witnesses in the case and have admitted to engaging in illegal insider trading for many years. The cooperators have pleaded guilty to charges including conspiracy and insider trading and are cooperating in the hope of getting lighter penalties, investigators say.
Mr. Lee’s Cooperation Agreement suggests that he engaged in illegal insider trading while working at Steven Cohen’s SAC Capital, the Connecticut-based hedge fund. Coincidentally, Mr. Cohen is said to be “out of the country” until Monday in the midst of all of this. Stay tuned …
Oct
19
Last week’s big enforcement news was that Galleon Group founder, Raj Rajaratnam, was charged with insider trading in the stocks of several companies, including Advanced Micro Devices, Clearwire and Akamai, earning millions of dollars in the process.
Federal prosecutors for the Southern District of New York accused Raj Rajaratnam with illegally obtaining and trading on information on these companies, which also included Polycom, Hilton Hotels, Google and People Support. He has been charged with four counts of conspiracy and eight counts of securities fraud. Others charged by prosecutors include Rajiv Goel, an executive Intel Capital, the venture capital arm of Intel, and Anil Kumar, an executive at McKinsey & Company.
You can view the full complaint here.
According to FINalternatives, this is just the tip of the Insider-Trading Iceberg:
Other hedge fund managers are among those expected to be charged, according to Bloomberg News, the result of a two-year-long investigation. Among those likely to be charged are individuals who came up during the surveillance of Rajaratnam, which included wiretaps. Authorities are also being helped by at least three former Rajaratnam colleagues, including California-based hedge fund managers Ali Far and Choo Beng Lee, according to The Wall Street Journal.
Oct
8
A dually registered broker-dealer and investment adviser (the “Respondent”) was sued by the SEC on September 29, 2009 for failing to require, among other things, that its registered representatives maintain antivirus software on the personal computers which were used to access customer account information on the firm’s intranet and trading platform. In addition, the SEC claimed that the Respondent did not have adequate procedures in place to review its registered representatives’ computer security measures. In particular, the SEC claimed that Respondent’s internal auditors did not audit branch office computers to determine whether anti-virus software was installed nor did they have adequate procedures in place to follow up on potential computer security issues uncovered during branch audits or when registered representatives contacted Respondent’s technology help desk for computer related assistance.
Oct
6
John Walsh, the Acting Director of the SEC’s Office of Compliance Inspections and Examinations gave the keynote address at the National Society of Compliance Professionals (”NSCP”) national conference yesterday. Mr. Walsh spoke about the top 5 lessons that the SEC has learned from the turbulent past year and what initiatives they are taking to enhance the effectiveness of the SEC’s oversight. Read the rest of this entry »
Aug
19
Robert Khuzami, Director of the Division of Enforcement, Securities and Exchange Commission, gave a speech on Wednesday (August 5, 2009) at the New York City Bar Association on his “First 100 Days” as Director of Enforcement. Mr. Khuzami addressed the three-month self-assessment the Enforcement Division has undertaken to evaluate how it can be more efficient and successful and the results of that work, the division’s core casework, and major initiatives undertaken at the Commission in the last three months. Read the rest of this entry »
Aug
17
The Securities and Exchange Commission today charged Ohio-based investment advisers Robert Pinkas and Brantley Capital Management (BCM) with securities fraud for overvaluing assets in an investment portfolio they managed in order to generate higher investment advisory fees. The SEC also charged another BCM official.
