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

Steinbrugge: Will Hedge Funds Help or Hurt During the Next Market Correction?

Sep 7 2016 | 11:55pm ET

Most investors have become accustomed to quick rebounds when markets correct, but...

Lifestyle

Quattrex Sports AG Debuts Soccer-Focused UCITS Fund

Sep 9 2016 | 9:54pm ET

Innovative alternative investment company Quattrex Sports has unveiled a new UCITS...

Guest Contributor

Malik: The Ever-Changing Middle Market and The Entering Class of 2016

Sep 2 2016 | 5:01pm ET

Deal sourcing and origination is only going to get more competitive given current...