Guggenheim Fined Over Hedge-Fund Shenanigans

Oct 12 2012 | 12:02pm ET

Guggenheim Securities and two traders have been rapped for allegedly tricking a hedge fund into overpaying for something, and then hiding it by making a secret deal with the hedge fund.

The Financial Industry Regulatory Authority ordered Guggenheim to pay $800,000 in fines for failing to supervise the two now-former traders. The traders, Alexander Rekeda and Timothy Day were suspended from the industry for one year and four months, respectively. In addition, Rekeda, the former head of Guggenheim's collateralized debt obligations desk, was ordered to pay $50,000, and Day $20,000.

FINRA accused Rekeda and Day of tricking the hedge fund into overpaying for a collateralized loan obligation to hide a loss they made on the CLO. The two allegedly lied to the hedge fund, which was not identified, telling it that the CLO was part of a package offered by a third party.

When the hedge fund started asking questions, it and the two traders struck a deal, with the hedge fund accepting the higher price in exchange for cash and fee breaks.

"Guggenheim's inadequate supervision allowed their traders to engage in extensive and repeated inappropriate actions to try to conceal a trading loss," FINRA enforcement chief Brad Bennett said.

FINRA does not regulate hedge funds, sparing the unknown firm a sanction of its own.


In Depth

U.S. Treasury Moves on Reinsurance Loophole

Apr 24 2015 | 5:11pm ET

The U.S. Treasury Department has released proposed rules aimed at limiting the ability...

Lifestyle

Artivest Announces Funding Round Led by KKR & Co.

May 4 2015 | 9:56am ET

Artivest, a startup that provides individual investors with access to private equity...

Guest Contributor

Starting a ‘40 Act Fund Family? Don’t Forget Your Board

Apr 30 2015 | 7:18am ET

The convergence of the hedge fund and mutual fund worlds continues unabated, as...

 

Editor's Note