BOSTON, Feb 8 (Reuters) - Recent insider-trading
prosecutions should serve as a warning to financial
professionals too young to recall the crackdowns during the
Reagan Era, a top Securities and Exchange Commission official
said on Wednesday.
"These lessons have to be re-learned" by the many financial
workers who were children in the 1980s, said Daniel Hawke, the
head of the SEC's market abuse division, speaking at a Boston
University event.
Hawke, 48 years old, said when he graduated from Boston
University's law school in 1989 the best-known securities cases
of the day involved insider-trading figures like Michael Milken
and Ivan Boesky.
But for most of the next two decades the insider cases the
SEC brought did not attract as much attention, with the result
being that activities like exchanging illegal stock tips became
more common.
Investigations since 2008, Hawke said, have shown 'that an
alarming number of securities industry professionals were
engaged in what we can call organized insider trading, where
there were literally networks of people who were on each others'
speed-dials, using disposable cellphones and other methods to
communicate."
Now, Hawke said, "we want to instill apprehension in people
who come into possession of nonpublic information," so they know
it should not used for profit.
INSIDER TRADING CASES WIDEN
Hawke, who also heads the agency's Philadelphia regional
office, leads an investigative division that has been at the
center of a number of headline-grabbing prosecutions since the
financial crisis.
Most noteable was the conviction last May of hedge fund
multimillionaire Raj Rajaratnam, who in December began serving
an 11-year-prison sentence, the longest on record for insider
trading.
Another case involves Rajat Gupta, a former director of
Goldman Sachs Group and Procter & Gamble, who the government
alleges provided tips to Rajaratnam. Gupta has pled not guilty
to charges dating to October.
Both cases are part of a probe that has also come to include
the alleged improper sharing of confidential information on
public companies, in some cases through what are termed "expert
networks" used by hedge funds begun by thirty-somethings.
In his wide-ranging talk sponsored by Boston University's
Center for Finance, Law & Policy, Hawke also described SEC
efforts to modernize its computer systems and processes. That
has helped to spot fraud and to analyze system problems such as
the "Flash Crash" of 2010.
Hawke said he hoped the agency would be assigned more
resources in the future and said movies like 1987's "Wall
Street" often portray agency officials with equipment they can
only wish for like motorboats and helicopters.
Also in the movies, Hawke said, "We carry guns, but we
don't" in actuality. "You don't want us to," he added.
(Reporting By Ross Kerber)
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