Saturday, 26 July 2014
Last updated 12 hours ago
Aug 6 2007 | 1:49pm ET
The Securities and Exchange Commissioned botched its probe of Pequot Capital and the hedge fund’s former chairman, John Mack, now the CEO of Morgan Stanley, a Senate report says.
The findings, jointly released by the Senate Finance and Judiciary committees, vindicate former SEC lawyer Gary Aguirre, who argued that he had been fired for pushing too hard to interview Mack, who he suspected had passed insider information to the hedge fund.
“Pequot’s trades in advance of the GE acquisition of Heller Finance were highly suspicious and deserved a thorough investigation,” the report said. Taking Mack’s testimony “was a reasonable next step in the investigation,” it added.
“We will follow up on the record and recommendations… with energy and urgency,” SEC Chairman Christopher Cox, who took the reins at the regulator just a month before Aguirre was fired, said. “The agency’s commitment to prosecuting insider trader has never been stronger.”
The report’s issuance represents the end of the committees’ probe of the situation, which began under the Republican-led Senate prior to the party’s defeat in the November 2006 elections. Still, it is not substantially less critical of the SEC than the interim report issued by Republicans in February. While the report notes that Aguirre’s allegations of favorable treatment for Mack had “an adverse impact on public confidence in the SEC,” the problem was deeper than public perception: “Our investigation uncovered real failures that need real solutions.”
The Senators called on the SEC to standardize its investigation procedures, improve record-keeping of outside communications dealing with probes and boost the independence of its internal inquiry staff.
“The SEC’s Office of Inspector General failed to conduct a serious, credible investigation of Aguirre’s claims,” the report said, noting that internal e-mails substantiated Aguirre’s claims that supervisors warned him away from seeking Mack’s testimony, because Mack’s political clout would make it hard to get a subpoena approved.
The report also backed up Aguirre’s claims that his firing was unjust, writing, “The SEC fired Gary Aguirre after he reported his supervisor’s comments about Mack’s ‘political connections,’ despite positive performance reviews and a merit pay raise.”
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…