Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, May 5, 2009

SEC Brings Insider Trading Charges Involving CDSs

The SEC filed a civil action in the United States District Court for the Southern District of New York on May 5, 2009, alleging that Renato Negrin, a former portfolio manager at hedge fund investment adviser Millennium Partners, L.P., and Jon-Paul Rorech, a salesman at Deutsche Bank Securities Inc., engaged in insider trading in the credit default swaps of VNU N.V., an international holding company that owns Nielsen Media and other media businesses.  According to the Commission's complaint, Rorech learned information from Deutsche Bank investment bankers about a change to the proposed VNU bond offering that was expected to increase the price of the CDS on VNU bonds. Deutsche Bank was the lead underwriter for a proposed bond offering by VNU. According to the complaint, Rorech illegally tipped Negrin about the contemplated change to the bond structure, and Negrin then purchased CDS on VNU for a Millennium hedge fund. When news of the restructured bond offering became public in late July 2006, the price of VNU CDS substantially increased, and Negrin closed Millennium's VNU CDS position at a profit of approximately $1.2 million.

The Commission's complaint charges violations of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. The Commission's complaint seeks a final judgment permanently enjoining Rorech and Negrin from future violations of the federal securities laws, ordering them to pay financial penalties and to disgorge ill-gotten gains with prejudgment interest.

The Commission's investigation is ongoing.

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