Exchange watchdogs made dozens of referrals to U.S. securities regulators about the once prominent hedge fund Pequot Capital Management, the chairman of the Securities and Exchange Commission said in a letter revealed on Monday.
With a single exception, all the referrals were forwarded to SEC enforcement staff to consider for new investigations, or to staff conducting probes regarding related parties, SEC Chairman Mary Schapiro said in a letter to Republican Senator Charles Grassley dated July 14.
Since 2005, the enforcement division received a total of about 45 referrals from various market watchdogs that included the word Pequot, Schapiro said in her letter.
Citing agency records from exchange watchdogs, Bloomberg reported that 36 reports had flagged possible insider trading involving shares of Google Inc, Cox Communications Inc, International Securities Holdings Inc, Premcor Inc and dozens of other companies.
Four reports indicated possible manipulation and four were labeled other, Bloomberg reported.
The numbers would indicate they had trading that closely preceded 36 material events, Bradley Bennett, a partner at Baker Botts in Washington, told Bloomberg.
Referrals are very strong at identifying accounts that are worth additional scrutiny, Bloomberg cited Bennett, a former SEC investigator who focused on insider-trading cases, as saying. Not all referrals result in enforcement actions.
In May, Pequot founder Arthur Samberg, one of the industry's best-known managers, surprised investors and employees by saying he would shut down the firm because of a reopened government probe into possible insider trading.
The firm, which once invested $15 billion and most recently managed roughly $3 billion, became the target of a U.S. Securities and Exchange Commission and U.S. Attorney's office investigation several years ago when investigators reviewed trades made by Samberg in Microsoft Corp stock in 2001 by the Core Funds.
Samberg and Pequot have not been accused of any wrongdoing by the SEC.
(Reporting by Svea Herbst-Bayliss with additional reporting by Rachelle Younglai in Washington; Editing by Richard Chang and Steve Orlofsky)