Saturday, October 7, 2006

The Pequot Insider Trading Investigation Fades Away

Allegations that senior management in the SEC's Enforcement Division quashed an insider trading investigation largely came to naught as the Commission decided not to file any civil insider trading charges in the case.  Former SEC staff attorney Gary Aguirre alleged to the Senate Judiciary Committee that after he sought to take the deposition of Morgan Stanley CEO John Mack in connection with an investigation of possible insider trading at a hedge fund run by Pequot Capital Management, upper-level managers in Enforcement refused to permit the testimony and then fired him two days after giving him an outstanding performance appraisal (see earlier post here and Aguirre's statement to the Judiciary Committee here).  With the glare of publicity, the SEC relented and authorized taking testimony from Mack, who was thought to be a potential source of the information about an impending transaction.  As expected, the renewed investigation had little effect on the final outcome as Pequot received notice from the Enforcement Division that it will not recommend the filing of charges against the firm or any individuals.  Consistent with SEC practice, the staff maintained that the investigation remains open -- essentially on the off chance that manna from heaven in the form of a confession from some unknown participant emerges.  The circumstances surrounding Aguirre's dismissal remain under investigation, but it's unlikely that anything further will come out about the case. An AP article (here) discusses Pequot's disclosure that the SEC investigation into its trading is complete. (ph)

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Insider Trading, Investigations, Securities | Permalink

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