More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
The Securities and Exchange Commission announced Friday that the Greenwich, Conn.-based hedge fund advisory firm Level Global Investors has agreed to pay more than $21.5 million to settle charges that its co-founder, who also served as a portfolio manager, and its analyst engaged in repeated insider trading in the securities of Dell and Nvidia Corp.
In January 2012, the SEC filed insider trading charges against Level Global, the firm’s co-founder Anthony Chiasson, the former analyst Spyridon “Sam” Adondakis, and six other defendants, including five investment professionals and the hedge fund advisory firm Diamondback Capital Management.
The SEC’s complaint, filed in federal court in Manhattan, alleged that “Adondakis was a member of a group of closely associated hedge fund analysts who illegally obtained highly sensitive information regarding the financial performance of Dell and Nvidia before this information was made public.”
According to the SEC, the “illegally obtained information involved Dell and Nvidia’s revenues and profit margins and sometimes indicated that the tech companies’ quarterly results would differ significantly from the consensus expectations of Wall Street analysts.”
During 2008 and 2009, Adondakis passed the information on to Chiasson, who used it to execute trades on behalf of hedge funds managed by Level Global, reaping millions of dollars in illegal profits, the SEC says. In 2011, following news reports of the government’s investigation, Level Global, which had once managed as much as $4 billion, announced that it would close its business and begin returning money to its investors. It is presently in the process of winding down its business.
“The insider trading at Level Global was hardly an isolated event—it occurred repeatedly, and involved multiple companies and multiple quarterly announcements,” said Sanjay Wadhwa, Senior Associate Director of the SEC’s New York Regional Office. “This settlement serves as another reminder that the SEC will hold hedge fund managers accountable when their employees violate the securities laws.”
The settlement with Level Global, which is subject to court approval, requires the firm to disgorge $10,082,725 in fees that it reaped from the alleged insider-trading scheme, to pay prejudgment interest of $1,348,824, and to pay a penalty of $10,082,725. Level Global neither admitted nor denied the SEC’s allegations.
Level Global has also agreed to the entry of an order permanently enjoining the firm from future violations of Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5, and Section 17(a) of the Securities Act of 1933.
Adondakis previously pleaded guilty to parallel criminal charges and agreed to a settlement with the SEC in which he admitted liability for insider trading, according to the SEC.
The SEC is continuing to pursue its insider trading claims against the firm’s co-founder Chiasson, who was convicted in December of securities fraud in a parallel criminal proceeding.
The SEC’s investigation is continuing.
Read Diamondback Capital Agrees to Settle SEC Charges on AdvisorOne.