Risk & Compliance

Senate Hearing to Probe SEC-Pequot Case

The Senate Judiciary Committee will hear testimony today about whether the Securities and Exchange Commission improperly handled its investigation ...
Marie LeoneDecember 5, 2006

Eric Ribelin, a branch chief in the Securities and Exchange Commission’s Office of Market Surveillance, will testify before a Senate Committee today regarding how the regulator handled its investigation of hedge fund Pequot Capital Management. Rebelin is the second SEC official to raise questions about the SEC’s probe into the hedge fund.

In June, former SEC investigator Gary Aguirre claimed he was fired because he questioned the decision by top SEC officials to halt the Pequot probe because one of the key subjects of the investigation “had powerful political connections.” Reportedly, Aguirre was referring to John Mack, the chief executive officer of Morgan Stanley, who was under investigation by the SEC for insider trading violations related to Pequot.

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

By last Friday, the case seemed all but resolved when the SEC cleared Mack of the insider trading charges.

However, the Senate Judiciary Committee, headed by Pennsylvania Republican Arlen Specter, pushed ahead with today’s hearing, which is slated to included Ribelin and several other witnesses involved in the Pequot case, including Aguirre, Linda Thomsen, the SEC’s director of Enforcement, Walter Stachnik, the SEC’s Inspector General—whose office handled Aguirre’s original complaint—and Ronald Tempas, a U.S. associate deputy attorney general.

The SEC is also under review by the Government Accountability Office. Iowa Republican Charles Grassley asked for the GAO investigation this fall, because he was concerned if the SEC was “faithfully adhering to its mission,” reported The New York Times

CFO.com will provide expanded coverage of today’s Senate hearing, which begins at 9:30 a.m, Eastern Time.

Meanwhile, Morgan Stanley continues to purchase hedge fund companies. This morning, the investment bank acquired its fourth hedge fund company, Brookville Capital Management, a four-year old firm with $221 million in debt, reported Bloomberg.