President Obama recently enacted into law the Jumpstart Our Business Startups Act, or more commonly known as the JOBS Act. Its main aim is to create more jobs by making it easier for small businesses to raise capital. (more…)

Rajat Gupta

The SEC have expanded their insider trading case against Rajat Gupta, “charging him with passing tips to convicted hedge fund manager Raj Rajaratnam much earlier than alleged before,” reports the Times of India. “In a superseding indictment filed Tuesday in federal court in Manhattan, prosecutors broadened their description of the insider-trading scheme, saying it began in March 2007 not in 2008 as alleged in October.” (more…)

David Einhorn, Greenlight Capital

Insider trading has been a hot topic in the finance world. Over the last year, the Securities and Exchange Commission (SEC) has fined or charged dozens of analysts and traders as part of an investigation several years in the making – the same investigation that resulted in Raj Rajaratnam being sentenced to 11 years in prison.

Recently, David Einhorn’s Greenlight Capital was fined for what Britain’s Financial Services Authority (FSA) for what it calls ‘insider dealing’ over his trades with Punch Taverns (read his story here). However, it is unlikely that the SEC would try to convict him for the same. (more…)

George Canellos

“Diamondback Capital Management, one of the largest hedge funds ensnared by the government’s insider trading crackdown, will not face criminal charges” reports the New York Times. Instead, it “will pay more than $9 million in fines and penalties to resolve its role in the investigation.”

Diamondback was able to enter into a non prosecution agreement with the US Attorney’s office. “The government agreed not to bring criminal charges against Diamondback, citing the fund’s prompt cooperation and voluntary adoption of remedial measures.” Under the terms of its agreement with the SEC and the federal government, Diamondback “will forfeit $6 million in ill-gotten gains and pay a civil penalty of $3 million.” George Canellos, head of the SEC’s New York Office, said of the pact: “We believe that the proposed settlement appropriately sanctions the misconduct while giving due credit to Diamondback for its substantial assistance in the government’s investigation and the pending actions against former employees and their co-defendants.” (more…)

The SEC is upping its game against hedge funds with returns too good to be true, reports the Wall Street Journal. “There is serious fraud in this space, and we have been attacking it,” said Bruce Karpati, co-chief of the SEC’s asset-management enforcement unit. There are roughly 100 funds on this new “most-wanted” list number and they each have just one thing in common – returns that fall outside the norm. Specifically, these funds are either “trouncing the overall market and others churning out modest results without ever suffering a down month,” making insider trading likely.

The list is the product of the SEC’s latest efforts to crack down in hedge fund fraud. “After the agency failed to detect the $17.3 billion Ponzi scheme by Bernard L. Madoff, who wowed investors with steady returns over several decades, SEC officials decided they needed a way to trawl through performance data and look for red flags that might signal a possible fraud,” writes the Wall Street Journal. (more…)

Kynikos, Third Point Are Dismissed From $8 Billion Fairfax Suit (Bloomberg)

James Chanos’ Kynikos Associates LP and Daniel Loeb’s Third Point LLC won dismissal from an $8 billion lawsuit accusing the two hedge funds of spreading negative information to drive down Fairfax Financial Holdings Ltd. (FFH)’s stock price. New Jersey Superior Court Judge Stephan C. Hansbury in Morristown granted their requests yesterday, saying they couldn’t be sued in New Jersey. Hansbury also dismissed Institutional Credit Partners LLC. All three firms are based in New York. In addition to Chanos and Loeb, also dropped from the suit were Jeffrey Perry, an analyst at Third Point, and William Gahan, who was an analyst at ICP. In September, Hansbury dismissed billionaire Steven A. Cohen and his Stamford, Connecticut-based SAC Capital Advisors LP from the case. “One must establish that the defendants purposely availed themselves of the State of New Jersey and that the alleged improper conduct was expected or intended to be felt within the State of New Jersey,” Hansbury wrote. He said Fairfax didn’t do that. Fairfax, a Toronto-based insurer, sued the hedge funds in 2006, alleging they acted to harm the company because they were betting its stock price would decline. The hedge funds named in the suit have denied Fairfax’s accusations. (more…)

Daniel Mudd

Daniel Mudd, the chief executive of Fortress Investment Group, “was clouded by the government investigations into his previous employer” reports the New York Times. Mudd joined the Fortress Investment Group in 2009, “nearly a year after the government forced him out as Fannie’s C.E.O.”

“On Friday… the Securities and Exchange Commission charged Mr. Mudd with securities fraud for allegedly understating Fannie’s exposure to subprime mortgages.”

“The S.E.C. filed a civil complaint against Dan Mudd, related to matters associated with his previous employment at Fannie Mae,” said Fortress spokesman Gordon Runte. (more…)

Phil Falcone, Harbinger Capital

Fund manager Phil Falcone is under the gun. The SEC filed Wells notices on Falcone and his hedge fund Harbinger Capital Partners on Friday, indicating charges are likely according to an article in the Wall Street Journal. (more…)

Phillip Falcone, Harbinger

Fitch Assigns Initial Ratings of ‘BB-’ to Harbinger Capital’s Spectrum (MarketWatch)

Fitch also assigns a ‘BB-’ rating to Spectrum’s proposed note offering of a 9.5%, $150 million senior secured notes. The new 144A notes are a tack-on to the existing $750 million 9.5% senior secured notes. It will be issued under the existing indenture with the same maturity of June 15, 2018. The funds will be used for general corporate purposes, including potential refinancing or acquisitions. Acquisitions are expected to be bolt-on’s in margin accretive businesses such as household insect control or the less seasonal pet supply category. (more…)

Mary Schapiro, SEC Chairman

SEC Scolded Over Records (WSJ)

An internal watchdog slapped the Securities and Exchange Commission on the wrist for its now-discontinued policy of discarding records from preliminary inquiries into possible Wall Street wrongdoing. SEC Inspector General David Kotz, in a report released Tuesday, said the regulator misled another federal agency, the National Archives and Records Administration, about its documents policy. The report also concluded the SEC should have retained preliminary investigation inquiry materials it was routinely discarding. But Mr. Kotz said he found no evidence of improper motives behind the policy or that it had hampered any full investigations. He declined to refer the matter to Justice Department officials for a possible criminal investigation. (more…)

Reed Hastings, Netflix

Netflix CEO Reed Hastings Sells His Stock in the Company (YCharts)

As the bloodbath for Netflix (NFLX) investors carries on, perhaps the CEO could boost a little confidence in the company if he would stop selling his own shares.  (more…)