TORONTO (HedgeWorld.com)--Both New York State Attorney General Eliot Spitzer and the U.S. Securities and Exchange Commission are investigating Canadian Imperial Bank of Commerce, among other banks that may have lent money to hedge funds knowing those hedge funds would use that money in the improper trading in equity shares of mutual funds.
"We are working with the SEC on this matter," said Brad Maione, a spokesman for Mr. Spitzer. He declined to comment when asked whether either agency was taking the lead role in that investigation.
"We're cooperating fully with all investigations into the matter, including that of Mr. Spitzer's office," said Stephen Forbes, vice president, marketing and communication for CIBC World Markets, the investment banking and brokerage division of CIBC. Mr. Forbes also confirmed reports that CIBC no longer finances hedge funds.
It has, though, seeded some such funds, among them Chronos Asset Management Inc., Cambridge, Mass., which already is under investigation in connection with market timing Previous HedgeWorld Story. Massachusetts' Secretary of the Commonwealth, William Galvin, charged in November that a group of Prudential Securities Inc. executives had allowed hedge funds to market time and late trade mutual funds. Those executives allegedly opened 60 accounts last year at Prudential for Chronos alone and others for other hedge funds involved in similar practices.
Mr. Galvin's complaint in that matter may shed some light on the ongoing investigations of CIBC because the complaint stated that the scheme started in 1998 when Michael Sassano, then with CIBC, referred Chronos as a client to one of the seven Prudential executives under scrutiny, Martin Druffner.
Mr. Sassano is now with Oppenheimer & Co. His office there said Tuesday afternoon that he has been on vacation and could not immediately be reached for comment.
Reports of an investigation have had little effect on CIBC's stock price, which closed Monday at C$65.11 (about US$48), near the 52-week high of C$66.25.