Risk & Compliance

Morgan Stanley Chief Will Testify to SEC

John Mack will meet with the commission's staff in connection with an insider-trading probe of Pequot Capital Management, a big hedge fund.
Stephen TaubJuly 21, 2006

Morgan Stanley chief executive officer John Mack will talk to the Securities and Exchange Commission regarding its investigation into possible insider trading at hedge fund Pequot Capital Management Inc., according to published reports.

“Yesterday, the SEC contacted John Mack and asked that he be interviewed regarding the hedge-fund matter that has been widely covered by the media recently,” Morgan Stanley spokesman James Badenhausen said in an E-mail statement, according to Reuters. “John immediately responded that he is happy to meet with the commission staff, and he welcomes the opportunity to put to rest any issues surrounding this matter.”

Last month, former SEC investigator Gary Aguirre testified before the Senate Judiciary Committee that senior SEC officials stopped a probe of Pequot because one of the subjects of the investigation “had powerful political connections…at the highest level.” That subject was reportedly Mack.

SEC spokesman John Nester told CFO.com after Aguirre’s testimony that he could not comment specifically on SEC investigations. Nester said, however, that “any suggestion that preferential treatment was sought or given in an investigation for political reasons is absolutely without merit.”

Aguirre said that when he questioned the commission’s top enforcement officials about the propriety of halting the probe, “they fired me,” and when he told chairman Christopher Cox about those events, “he did not lift a finger.” Nester disputed Aguirre’s charge that his letter to Cox never got a response, noting that the letter was referred to the Inspector General’s office, as is standard SEC policy.

Pequot, which handles $7 billion for investors, has denied any wrongdoing. In June 2005, Mack spent less than a month as chairman of the hedge-fund giant, which was founded by Art Samberg.

4 Powerful Communication Strategies for Your Next Board Meeting