SEC Exposes Wall St. Insider Trading Ring

Mar 1 2007 | 8:12pm ET

The Securities and Exchange Commission has charged fourteen defendants, some representing Wall Steet’s crème de la crème and a few hedge funds, with insider trading.   According to the SEC, these insiders allegedly serially traded on material, nonpublic information tipped, in exchange for cash kickbacks, by other insiders at UBS Securities and Morgan Stanley.

In one scheme, which has allegedly been ongoing since 2001, at least eight professionals, three hedge funds, two broker-dealers and a day-trading firm made thousands of illegal trades and millions of dollars in profits using inside information misappropriated by a UBS executive to trade ahead of UBS analyst recommendations.

In a second scheme, several securities professionals and a hedge fund made dozens of illegal trades and hundreds of thousands of dollars in profits using inside information misappropriated by an attorney at Morgan Stanley to trade ahead of corporate acquisition announcements. Collectively, the SEC alleges that the defendants made at least $15 million in profits from these two insider-trading schemes.

The hedge funds in question include Lyford Cay Capital, a hedge fund at Bear Stearns, Q Capital Investment Partners and Chelsey Capital.

The SEC's complaint seeks permanent injunctive relief, disgorgement of illicit profits with prejudgment interest, and the payout of civil monetary penalties.


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Chicago-based independent futures brokerage and clearing firm R.J. O’Brien & Associates (RJO) has hired industry veteran Daniel Staniford as Executive Director, responsible for the firm’s institutional business development in New York and London.

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