U.S. financial regulators are pushing to turn hedge funds into informers on the white collar crime beat. The Financial Crimes Enforcement Network (FinCEN) is working on a rule that would require U.S. hedge funds to file formal reports notifying U.S. authorities of any suspicious trading by employees or outside parties, the regulatory agency said. The rule being crafted by FinCEN, part of the Treasury Department, would force the $2 trillion hedge fund industry to police itself in much the same way banks, brokerages and mutual funds are required to do by filing suspicious activity reports (SARs) with the unit. Steve Hudak, a FinCEN spokesman, said a proposed rule for the hedge fund industry could be filed for public comment some time in the first half of this year. But the rule, which would cover activities such as insider trading and money laundering, will force funds to spend more money on building out their compliance and legal departments. Hedge fund lawyer Ron Geffner said he expects many in the industry will oppose the new rule as being both intrusive and costly. [Reuters via Dealbook, FINalternatives]
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Expert: Hedge Funds Unlikely To Be Thrilled By Rule Requiring Them To Rat Out Employees Engaging In Securities Fraud, Other Criminal Activities On Their WatchBy Bess Levin
Last week, we discussed the whistleblower payout awarded to Bradley Birkenfeld, a former UBS employee who single-handedly made the government’s case against the Swiss bank re: tax evasion, scoring the US between $780 million and $5 billion, depending on how much credit you want to give him. Earlier in the month, Birkenfeld secured a $104 million bonus from the IRS for his assistance, though only after a lot of hoop jumping, nearly three years in a federal prison, and several months in a halfway house, prompting us to wonder how much money, if any, it would take to get you to blow the whistle on some colleagues playing it fast and loose with the law,* if you would do time for it, and, if so, how much? Today brings one more issue to consider, should you be seriously considering teaching your coworkers a lesson they’ll never forget, which is: are you will to get your face rearranged and/or have your ear stapled to your spacebar?** Read more »
Morgan Stanley Guy Identified As Friend And Partner Of Brothel CEO Doesn’t Know What All The Fuss Is AboutBy Bess Levin
Earlier today it was reported that the Morgan Stanley employee who was helping Upper East Side madam and self-titled “CEO” Anna Gristina/Scotland expand her “empire” was a broker David Walker. Subsequently, some people showed up to one David Walker’s apartment for a comment on the matter. He told them 1) That contrary to various stories, he was “not there” when Gristina was arrested 2) That he doesn’t get why he’s the only Morgan Stanley guy being singled out here and 3) How dare you- she’s a nice lady! Read more »
Feds Charge Two Former SAC Capital Traders, One Of Whom Is A Cooperating Witness, Others With Insider TradingBy Bess Levin
The individuals who will have their names mentioned at a noon press conference are hedge fund manager Samir Barai of Barai Capital, Barai Capital analyst Jason Pflaum, former CR Instrinsic (a division of SAC) manager Donald Longueuil (most recently with Empire Capital) and former SAC PM Noah Freeman. Read more »
A few weeks before Christmas, documents were released by the government revealing that at least one of the cooperating witnesses in its Insider Trading Fest(ivus) was currently employed at a hedge fund. Some people said the CW was with Level Global. The firm assured clients earlier this week that after conducting “extensive internal factual correlation analysis and cross-referencing the facts in the complaints to our firm’s records,” they can say confidently such is not the case.
We are writing to address investor inquiries related to the two most recent complaints filed by the U.S. Attorney’s Office in connection with the Government’s ongoing investigation into alleged insider trading in the financial services industry. As
you know we have been cooperating with the U.S. Attorney’s Office and have met with them on several occasions, in part, to discuss the challenges posed by speculation in the press about its investigation and Level Global’s need to communicate candidly with our investors.