SEC Insider Dealing Probes Will Focus More On Derivatives

by Leroy Baker, Tax-News.com, New York

30 November 2009

"The days of insider-trading scrutiny being focused almost solely on the equity markets are now gone," Robert Khuzami, enforcement director of the US Securities and Exchange Commission announced recently at a New York legal conference on hedge-fund regulation, according to Bloomberg.

Khuzami joined the SEC in March, and has recruited a knowledgable team of investigators, and instigated more than 20 inquiries recently, after the SEC was found wanting in respect of the Bernard Madoff ponzi scheme scandal.

The SEC's first-ever insider trading case involving credit default swaps started in May 2009 and concerned a salesman at Deutsche Bank who allegedly supplied information illegally to a hedge fund manager.

The SEC’s risk strategy and financial innovation division was established in September under the leadership of law professor Henry Hu. According to financial-planning.com, Khuzami announced in August that the division would develop in-house technology to analyze suspicious trading activity. He also noted that “real-time records” may be required for scrutiny in cases involving asset valuation modalities.

However, complaints have been raised about the costs of all this extra supervision, and questions asked as to how the public is losing out.

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