Financial Regulatory Forum

SEC’s boardroom bombshell: directors can be costly

NEW YORK, March 4 (Westlaw Business) Being an insider with a fiduciary duty sure is risky, as heavyweight Rajat Gupta is now finding out amidst serious SEC charges. So is having board members, as Goldman Sachs and Procter and Gamble are now worrying. Of great concern to each are the reputational risks and attendant costs that this might impose on them. The potential risks could relate to a broad range of issues, ranging from inside information, to disclosure of SEC investigation and board member protection. Though this likelihood may seem remote, recent experiences from Bank of America to Goldman Sachs itself show them to be painfully possible.

With a plot literally ripped from the headlines and a narrative crackling like a Law & Order script, the Commission has charged Gupta in the spreading Galleon insider trading scandal. The case links Berkshire Hathaway, Goldman Sachs and Procter and Gamble (P&G) to what is shaping up to be one of the biggest non-Madoff financial crime stories of the young century. (more…)

SPECIAL REPORT – Philadelphia SEC unit, where rogue traders dare not tread

Reuters Staff

Feb 19, 2010 11:40 EST

By Matthew Goldstein

PHILADELPHIA, Feb 19 (Reuters) – An office building that sits atop an upscale shopping mall in downtown Philadelphia is not the sort of place that would ordinarily strike fear into the hearts of bad guys on Wall Street.

But that is home turf for the little-known regulator who has built a better mousetrap: an increasingly sophisticated computer database which is already helping the U.S. Securities and Exchange Commission catch insider traders.

Last month, Daniel Hawke, an energetic, guitar-playing 46-year-old lawyer, was named head of a new task force charged with cracking down on a variety of market abuses.

Even before the promotion, Hawke, who remains director of the SEC’s Philadelphia office, cast a surprisingly long shadow over the financial industry from his perch a two-hour or so drive from the canyons of Wall Street.

A few weeks after hedge fund billionaire Raj Rajaratnam was arrested in New York last October in the most significant insider trading investigation in two decades, Hawke and his team of lawyers were busy working to reel in the next big catch.

In mid-November, his crew handed out more than a dozen subpoenas to hedge funds and Wall Street investment firms seeking information about trading activity in shares of several drug manufacturers and consumer products companies that were buyout targets in 2006 and 2007.