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

Q&A: Sancus Capital And The Disruption Of The CLO Market

Oct 5 2017 | 6:28pm ET

Traditional collateralized loan obligation (CLO) funds in the U.S. market can offer...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Finding Success as Alternatives Converge

Oct 9 2017 | 4:00pm ET

Rising interest among institutional investors over the past several years has led...

 

From the current issue of