Hedge Fund Portfolio Manager Charged with Insider Trading That Enriched Fund Investors
The SEC has filed a complaint against a hedge fund’s portfolio manager alleging insider trading for the benefit of the hedge fund. The SEC has alleged that the portfolio manager was friends with an investment banker that had inside information concerning the acquisition of a public company. The SEC alleges that the investment banker provided the portfolio manager with inside information ahead of public disclosure and that the portfolio manager made profitable trades resulting from the information. In its complaint, the SEC argues that the portfolio manager knowingly or recklessly received material nonpublic information, had a duty to maintain the confidentiality of that information, and made material omissions in trading on that information.
OUR TAKE: The SEC has named the individual portfolio manager as a defendant even though the complaint does not allege that the portfolio manager profited personally. If the SEC’s allegations are true, the hedge fund investors are the real beneficiaries of the insider trading.