Wednesday, February 07, 2007


The SEC is investigating investment banks and their equity trades. Readers of the Recapitulator know how this works. Record bonuses on wallstreet are a blessing and a curse. They are a blessing becuase they bestow status on employees, and attract the bright and ambitious. They are a curse because they attract attention from regulatory bodies. Front-running is an epidemic when information directly translates into profits (often at the expense of CLIENTS like Amaranth) The SEC will collect a few scalps, fines (that come no-where near quarterly profits) will be levied, banks will promise "greater oversight and controls", and that will be that.

SEC Opens Review of Market-Moving Stock Trading at 10 Firms

Feb. 6 (Bloomberg) -- The U.S. Securities and Exchange

Commission opened a review of how Wall Street handles
confidential information, asking 10 top securities firms for all
their stock-trading records for the last two weeks of September.

The examination is aimed at determining whether details
about trades big enough to push a stock price up or down had
been leaked to other traders, Lori Richards, director of the
SEC's office of compliance inspections and examinations, said
today in an interview.

The review appears to be the first to target a specific
period of time for a group of the biggest firms, and is focusing
on brokerages that cater to big trading customers such as hedge
funds to find evidence of insider trading, Richards said. She
declined to name the firms. The N3w Y0rk T!mes reported earlier
today that they include M3rrill Lvnch & Co., M0rgan St@nley, UBS
AG and D3utsche B@nk AG.

This is a fact-finding effort, not an examination based
on specific tips about misconduct at any particular firm,''
Richards said. The agency is acting on complaints from investors
such as mutual funds that information about their large-scale
trades may be leaking from, or exploited by, Wall Street firms
that execute the transactions, she said.

By looking at several companies at once, the SEC may be
able to detect instances in which information about a big trade
at one firm resulted in an improper trade being placed at a
separate company, Richards said. If the review uncovers evidence
of potential insider trading, it will be turned over to the
SEC's enforcement unit for possible legal action, she said.

The prime brokers provide the SEC with a window into the
trading activities of the hedge funds they serve,'' Thomsen told
a Senate panel in December. ``The enforcement division remains
optimistic about prime brokers as a source of leads regarding
unlawful insider trading.''

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