Hedge Fund Insider Trading Probe Expands
With the arrest of 13 additional individuals and entities in the Galleon case, we urgently see the need for hedge fund compliance to beef up in two areas:
OPERATIONAL RISK CONTOLS- Hedge Funds need to understand and monitor where and how the information being traded on is generated.
TRAINING – Employees need to understand precisely what “insider trading” is, how it is uncovered by authorities and what their internal processes related to it are.
The SEC’s investigation of this case goes back to 2007 (well before Madoff), and it has been ground-breaking in numerous ways, including in the use of wiretapping.
In addition— related to the “beefing up” of the SEC– hedge funds should note that the new associate regional director for examinations for the New York office is Norm Champ, the former General Counsel for hedge fund group Chilton. See http://www.sec.gov/news/press/2009/2009-231.htm to view the SEC’s press release regarding this appointment.