Senators Slam SEC Hedge Fund Probe

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.”

RELATED STORIES

SEC Acknowledges Flawed Employee-Review System 
Senators Issue Damning Report On SEC Pequot Probe
Senator: Probe 'Supportive' Of Fired Lawyer's Pequot Claims
Former Pequot Prober Defends Self Against Journal's Slings And Arrows


In Depth

Q&A: Executive Recruiter Talks Hedge Fund Closures, Hiring Trends

Dec 19 2014 | 6:58am ET

This year, hedge funds have been closing at a rate not seen since the financial...

Lifestyle

Cooper-Hohn Won't Contest Divorce Settlement

Dec 18 2014 | 9:51am ET

The ex-wife of hedge fund billionaire Christopher Hohn will not contest a divorce...

Guest Contributor

Alternative Investment Funds Face A Communications Imperative

Dec 19 2014 | 6:10am ET

A handful of the top alternative investment firms on both sides of the Atlantic...

 

Sponsored Content

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

December 2014 Cover

Futures 2014 person of the year

Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.