U.S. take on targets insider trading

Bloomberg

Federal investigative authorities are preparing to press charges against a wider range of network insider trading, some of which are related to the criminal case against the billionaire hedge fund manager Raj Radzharatnam, shook Wall Street last week, claiming familiar.
Upcoming campaign, the result of at least a two-year investigation into targeting professionals in securities trading, including hedge fund managers, lawyers and Wall Street players, say familiar. Some investigations, such as that of Radzharatnam are based on the interception. Others stem from a secret project of the Commission on the Securities and Exchange Commission (SEC), using a special program for retrieving information. Its purpose is to identify groups of people who have similar and accurately selected as investments during the stock market.
Years investigating authorities could not gather the necessary evidence against large institutional investors such as hedge fund managers, who often avoid the regulatory inquiries regarding suspicious early bets by claiming that they are statistical coincidences background of their millions of transactions. The indictment against Radzharatnam based on recorded conversations between alleged participants in the conspiracy net, has shown that U.S. investigative authorities use more aggressive tactics to penetrate the pellets of the transactions and to trace the flow of information.
„If you shoot at the king to watch is deadly,“ said Bradley Bennett, a partner at Baker Botts in Washington, which as an investigator of the SEC has been engaged in insider trading. „When he will face a billionaire, they are required to build the most stable possible indictment, but there is no strong evidence of defendant’s own words.“
SEC spokesman John Nestar declined to comment, and his colleague from the justice ministry Alejandro Miyar.

Intel, McKinsey, IBM

Radzharatnam that based hedge fund Galleon Group in 1997, was arrested along with five alleged accomplices on October 16 in, according to prosecutors, the biggest action against hedge fund on suspicion of insider trading. State prosecutors said Radzharatnam and his company have earned $ 18 million through investments based on information from the hedge fund credit rating agency and employees in companies such as Intel Capital, McKinsey & Co. and IBM Corp.
Radzharatnam not yet pleaded. His lawyer Jim Walden said last week that prosecutors wrongly interpret the evidence against his client and the prosecution is not as stable as they claim.
Several senators, including Democrat from Pennsylvania Arlen Specter, a year pressuring regulators to strengthen supervision over its hedge funds. Some of their concerns were provoked by the SEC decision in 2006 to close the investigation of insider trading against Pequot Capital Management Inc., Once the largest hedge fund manager, after investigators said they do not have enough evidence for pressing charges .
SEC renew Pequot case in so far as to whether the Fund has unduly benefited from information from former employee of Microsoft Corp. In August, the Pequot and its founder Arthur Sambarg said that the agency may take action against them, but allegations of insider trading are groundless.
Many cases start from the stock exchanges of signals to the SEC for active traders who make profitable bets just before the important statements of companies. A man who rarely traded on the Exchange, will hardly explain what motivated him to atypical investment. But hedge funds can more convincingly be attributed to extraordinary profits of skill or sheer luck.
To overcome this barrier, some two years before the SEC began to use computer software, which passed the data on hundreds of millions of transactions in electronic commerce method (known as the blue sheets), annexed to the reports of exchanges of suspicious cases are familiar with the project say . Investigators looking for recurring patterns in the library of data and identify groups of traders who have consistently made similar and accurately selected as the time bets.

UBS, Blackstone

Once you find a group of comparable transactions, investigators have resorted to other sources of information to determine how its members have received and exchanged information. If a group benefit from such transactions before a series of corporate takeovers, check the SEC called. rankings, indicating the investment banks or law firms, consultants to the transaction. If a company is repeated in all cases, the likely source of leaked is its servant.
The strategy for extracting information from such data has one of the first cases in February, when prosecutors accused the SEC and acquisitions advisers in UBS AG and Blackstone Group LP of involvement in insider trading of $ 8 million, indicating familiar with the investigation. Then the lead investigator in the SEC case, Daniel Hawk said that the authorities have used an innovative technique to detect fraud, but did not specify what.
Radzharatnam investigation of the project did not set out to retrieve the information, but again zasyakla SEC is suspicious transactions similar to the case say.

Tapping continues

From the indictment it is clear that the investigating authorities have developed at least one informant from the rim, which in November 2007 began to meet with FBI agents. Prosecutors have obtained judicial authorization for the placing of listening devices – a technique traditionally reserved for combating organized crime, drug cartels and terrorist organizations.
Monitoring the investigation of Radzharatnam has led law enforcement to other suspects, so that they can expect more accusations, claiming familiar. Priest Barara prosecutor said on October 16 that the Ministry of Justice will continue to use listening devices to eradicate insider trading.

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