U.S. to Charge At Least 1 in Trading Probe
Thursday, March 1, 2007
Federal authorities plan to file criminal and civil charges as early as today against one or more UBS employees for providing traders with advance notice of stock-rating adjustments in exchange for cash payments, according to sources familiar with the case.
The charges mark the latest attempt by the Justice Department and the Securities and Exchange Commission to stanch the flow of improper tips to traders, including hedge funds and private equity firms, who seek to collect information that helps them profit in advance of notable corporate announcements.
Representatives for the U.S. Attorney's Office in the Southern District of New York and the SEC declined to comment yesterday on the months-long probe, as did a spokesman for UBS. The possible charges were reported by the online editions of BusinessWeek.
Sources briefed on the case spoke on condition of anonymity because the charges had yet to be publicly filed. The sources said at least one UBS worker had provided multiple traders with tips that UBS analysts had decided to upgrade or depress their ratings on a stock. Access to such information before it is disseminated to the public could allow a favored group of traders to profit at the expense of average investors.
Earlier this year, the SEC's Office of Compliance Inspections and Examinations requested a wide batch of trading data from investment banks and brokerage firms from the third quarter of last year in an effort to determine whether brokers may be passing inside information to hedge funds, which pay steep fees.