Two people have been charged by the US Securities and Exchange Commission (SEC) in the first case of alleged insider trading involving credit default swaps (CDS).
According to the regulator's complaint, Jon-Paul Rorech, a salesman with Deutsche Bank Securities, was told by investment bankers at the firm about a change in a proposed bond offering from Dutch media conglomerate VNU that would increase the price of the CDS on VNU bonds.
He is alleged to have passed this privileged information to Renato Negrin, a former portfolio manager at hedge fund investment adviser Millennium Partners, who then purchased CDS on VNU for one of his hedge funds.
When the restructured bond offering became public in late July 2006, the price of VNU CDS increased substantially and Negrin closed his fund's VNU CDS position for a profit of around $1.2 million, the SEC said.
Scott Friestad, deputy director of the SEC's enforcement division, said: "As alleged in our complaint, Mr Rorech and Mr Negrin checked their integrity at the door and schemed to engage in insider trading of CDS to the detriment of investors and our markets."
According to the regulator's complaint, Jon-Paul Rorech, a salesman with Deutsche Bank Securities, was told by investment bankers at the firm about a change in a proposed bond offering from Dutch media conglomerate VNU that would increase the price of the CDS on VNU bonds.
He is alleged to have passed this privileged information to Renato Negrin, a former portfolio manager at hedge fund investment adviser Millennium Partners, who then purchased CDS on VNU for one of his hedge funds.
When the restructured bond offering became public in late July 2006, the price of VNU CDS increased substantially and Negrin closed his fund's VNU CDS position for a profit of around $1.2 million, the SEC said.
Scott Friestad, deputy director of the SEC's enforcement division, said: "As alleged in our complaint, Mr Rorech and Mr Negrin checked their integrity at the door and schemed to engage in insider trading of CDS to the detriment of investors and our markets."
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