The US Securities and Exchange Commission (SEC) mishandled an investigation of suspicious hedge fund trading which led to the 2005 dismissal of an SEC attorney, according to a US Senate report.
The report, from the Senate finance and judiciary committees, released this weekend, ends a year-long inquiry into the dismissal of former SEC staff member Gary Aguirre.
Mr Aguirre says that he was forced out of the agency after an inquiry he was leading into stock trades by hedge fund Pequot Capital got too close to prominent Wall Street banker John Mack, now chief executive of Morgan Stanley. His claims prompted three Senate hearings.
The final Senate report criticised the SEC's management of the investigation and expressed concerns about whether allegations of improper political influence had damaged the agency.
"The public airing of evidence in support of those allegations undoubtedly had an adverse impact on public confidence in the SEC," it said. "However, the controversy is more than merely an issue of perception. Our investigation uncovered real failures that need real solutions."
It recommended that the SEC standardise investigative procedures; make supervisors keep records on outside communications involving investigations; and improve the independence of its internal inquiry staff. "We will follow up on the report and recommendations . . . with urgency," SEC chairman Christopher Cox said.
Mr Aguirre has said his inquiry led him to suspect that Mr Mack had tipped off Pequot on the 2001 buyout of Heller Financial by General Electric. He said that he wanted to subpoena Mr Mack, but was stopped by SEC supervisors and subsequently dismissed.
- (Reuters)
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