Risk & Compliance

Hedge Fund Chair Says SEC Dropping Probe

The SEC reportedly will not bring enforcement actions against Pequot Capital. In June, a former SEC investigator testified before Congress that the...
Stephen TaubOctober 5, 2006

The founder and chairman of Pequot Capital, the giant hedge fund, said that the Securities and Exchange Commission informed him that it will not recommend enforcement action against the company or any of its employees. Although the company is still being probed by the SEC for matters related to insider trading, it is “nonetheless gratified by the staff’s determination,” said Pequot founder Art Samberg, in a brief letter to “clients and friends.”

The Pequot probe raised questions about whether the SEC backed off from its investigation of the fund for political reasons. In June, former SEC investigator Gary Aguirre testified before the Senate Judiciary Committee that senior SEC officials stopped the hedge fund probe because one of the subjects of the investigation “had powerful political connections … at the highest level.”

SEC spokesman John Nester said he could not comment on the recent announcement. At the time of the hearing, although Nester told CFO.com that although he could not comment specifically on commission investigations, he said: “Any suggestion that preferential treatment was sought or given in an investigation for political reasons is absolutely without merit.”

Aguirre had testified that when he questioned the commission’s top enforcement officials about the propriety of dropping the probe, “they fired me.” During the hearing, Aguirre also described how in May 2005, his former supervisor, Branch Chief Robert Hanson, directed him to spend all his time identifying an individual who may have leaked information to Samberg.

That suspected tipper was identified by The New York Times and other news outlets as John Mack, currently chairman and chief executive officer of Morgan Stanley who had run Pequot for one month.