Remarks recently delivered by a senior enforcement official at the Securities and Exchange Commission suggest that securities regulators are now looking to expand their definition of what constitutes insider trading and others types of securities fraud, the FOX Business Network has learned.
The remarks were made by David Rosenfeld, associate regional director and co-head of enforcement in the SEC’s New York office, at a conference earlier this month. The comments have the legal advisers at big Wall Street firms and hedge funds scrambling to determine if their clients have been routinely violating insider trading laws as well as Regulation FD, which prohibits companies from selectively disclosing corporate information to only a handful of market participants, according to three partners at major law firms who were in attendance.
“Based on what he said it seems like the SEC is expanding the definition of insider trading and other violations,” said a senior partner at a major law firm who requested anonymity because he has cases before the commission.
SEC spokesman Jon Nester said some of Rosenfeld’s remarks have been taken out of context.
“He was basically telling people to be careful,” Nester said.
But many of the attendees interviewed by the FOX Business Network disagree, saying Rosenfeld was interpreting routine communications between investors, analysts and corporate officials as illegal because inside information could be disclosed.
“David was frankly shocked that some of this stuff was going on, which in turn shocked me,” said another attendee who is a partner at a major law firm. “You talk to your institutional investors as a regular course of business, and I can tell you from talking to people at the SEC, David is not alone at the commission holding these views.”
Rosenfeld’s remarks carry weight because his office brought one of the most high-profile insider trading cases in recent history by charging former Galleon Group chief Raj Rajaratnam with violating civil insider trading laws. In addition to the SEC’s civil case, Rajaratnam was convicted of criminal insider trading charges and has been sentenced to a lengthy prison term.
Rosenfeld made his comments at a Feb 2 conference sponsored by the Directors Roundtable Institute, titled “A New Era of Federal Prosecutions: Challenges for Main Street and Wall Street.” He appeared on the panel with five top Wall Street attorneys to discuss the current crackdown on insider trading and how regulators are broadly enforcing other securities laws. About 300 people attended, many of them senior partners at major law firms, or senior legal officials at big banks.
Rosenfeld first raised eyebrows with remarks involving how companies disclose information to investors and analysts, said one person who was in attendance. This person said Rosenfeld said he was “surprised” that Wall Street analysts and companies they cover have private conversations after earnings calls, where corporations broadly distribute their quarterly results.
Rosenfeld indicated that these private communications could violate Regulation FD, this person said, even though analysts routinely call corporate executives to get additional color and clarification on earnings; such practices have been considered legal in the past, legal experts say.
In addition, Rosenfeld called “troubling” other activities that are commonplace in the securities business, such as one-on-one meetings between analysts and corporate officials during so-called “analyst days” where companies discuss corporate issues with analysts and investors. Rosenfeld said these meetings could also violate rule FD and insider trading laws, according to another person who was in attendance.
Another controversial aspect of Rosenfeld’s remarks came during a discussion involving so-called expert networks, which provide hedge funds and other large investors with industry-specific information and data.
Expert networks — which employ corporate executive with detailed knowledge of companies and industries such as health care and technology –have been the target of the current insider trading crackdown for allegedly providing material, non-public information to their hedge fund clients.
Rosenfeld suggested that no corporate executive should ever work with an expert network even though these outfits have long provided broad industry insight and other data that don’t violate securities laws, said one of the attendees.
“Rosenfeld said the government’s view is that no employees should be talking to expert networks even though hedge funds and public firms have been using expert networks legally for years,” said the attendee said.
Nester said in terms of the expert networks, Rosenfeld was suggesting that “he couldn’t see why corporate executives would want to talk to these networks.” As for the other issues, Rosenfeld was pointing out how Rule FD violations might occur through one-on-one meetings, not making a blanket statement that they are in of themselves problematic, Nester said.
Columbia law school professor John Coffee said that the SEC may be simply showing “an excessive level of suspiciousness.”
“I think Rosenfeld is saying that we are nervous about what companies are telling analysts when analysts make calls directly to the company after earnings calls,” Coffee said. “But it’s unrealistic to say that stuff is surprising because of the obvious need to get more information and clarification.”
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“China pledged to invest in Europe’s bailout funds and sustain its holdings of euro assets, spurring gains in the currency and Asian stocks on optimism the region’s debt crisis will be overcome.
“China will always adhere to the principle of holding assets of EU sovereign debt,” People’s Bank of China Governor Zhou Xiaochuan said in Beijing today. “We would participate in resolving the euro debt crisis,” he said, echoing comments by Premier Wen Jiabao yesterday.
The remarks offer a carrot to European finance ministers, who are increasing pressure on Greece to deliver budget cuts in exchange for a second bailout. At stake for China is helping to stabilize the economy of its largest export market amid a global slowdown that has curtailed growth in Chinese shipments abroad.
“Wen and Zhou are giving the best support China can offer now, which is to send out positive messages such as promising not to cut euro assets and to buy European bonds to help bolster market confidence,” said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd. who previously worked at the European Central Bank. “How much and when China will buy will depend on its foreign-exchange investment strategy — when they find the pricing and exchange rate favorable.”Comments »
Paulson & Co. sold 25.1 million shares of Citigroup valued at $643 million as of Dec. 31, according to a filing today with the U.S. Securities and Exchange Commission. The hedge fund sold about 64.3 million shares of Bank of America worth $394 million.Comments »
The FDA won its two-year fight to shut down an Amish farmer who was selling fresh raw milk to eager consumers in the Washington, D.C., region after a judge this month banned Daniel Allgyer from selling his milk across state lines and he told his customers he would shut down his farm altogether.
The decision has enraged Mr. Allgyer’s supporters, some of whom have been buying from him for six years and say the government is interfering with their parental rights to feed their children.
But the Food and Drug Administration, which launched a full investigation complete with a 5 a.m. surprise inspection and a straw-purchase sting operation against Mr. Allgyer’s Rainbow Acres Farm, said unpasteurized milk is unsafe and it was exercising its due authority to stop sales of the milk from one state to another.
His customers are wary of talking publicly, fearing the FDA will come after them.
“I can’t believe in 2012 the federal government is raiding Amish farmers at gunpoint all over a basic human right to eat natural food,” said one of them, who asked not to be named but received weekly shipments of eggs, milk, honey and butter from Rainbow Acres, a farm near Lancaster, Pa. “In Maryland, they force taxpayers to pay for abortions, but God forbid we want the same milk our grandparents drank.”
The FDA, though, said the judge made the right call in halting Mr. Allgyer’s cross-border sales.
“Intrastate sale of raw milk is allowed in Pennsylvania, and Mr. Allgyer had previously received a warning letter advising him that interstate sale of raw milk for human consumption is illegal,” agency spokeswomanSiobhan DeLancey said.
Neither the FDA nor the Justice Department, which pursued the legal case, provided numbers to The Washington Times on the cost of the investigation and court fight.
Fans of fresh milk, which they also call raw milk, attribute all kinds of health benefits to it, including better teeth and stronger immune systems. Raw milk is particularly popular among parents who want it for their children.
In a unique twist, the movement unites people on the left and the right who argue that the federal government has no business controlling what people choose to consume.
In a rally last year, they drank fresh milk in a park across Constitution Avenue from the Senate.
But the FDA says it concluded, after extensive study along with the Centers for Disease Control and Prevention, that raw milk is never safer than pasteurized milk. It disputes those who say pasteurization — the process of heating food to kill harmful organisms — makes it less healthy.
Many food-safety researchers say pasteurization, which became widespread in the 1920s and 1930s, dramatically reduced instances of milk-transmitted diseases such as typhoid fever and diphtheria.
The FDA began looking into Mr. Allgyer’s operations in late 2009, when an investigator in the agency’s Baltimore office used aliases to sign up for a Yahoo user group made up of Rainbow Acres customers.
The investigator placed orders for fresh milk and had it delivered to private residences in Maryland, where it was picked up and documented as evidence in the case. By crossing state lines, the milk became part of interstate commerce and thus subject to the FDA’s ban.
At one point, FDA employees made a 5 a.m. visit to Mr. Allgyer’s farm. He turned them away, but not before they observed milk containers labeled for shipment to Maryland.
After the FDA first took action, Mr. Allgyerchanged his business model. He arranged to sell shares in the cows to his customers, arguing that they owned the milk and he was only transferring it to them.
Judge Stengel called that deal “merely a subterfuge.”
“The practical result of the arrangement is that consumers pay money toMr. Allgyer and receive raw milk,” the judge wrote in a 13-page opinion.
Grassfed On the Hill Buying Club has about 500 active members.
Liz Reitzig, a mother who has become a raw-milk activist and is an organizer of the group, said the lawyers who pursued the case againstMr. Allgyer ought to “be ashamed.”
“Many families are dependent on the milk for health reasons or nutritional needs, so a lot of people will be desperately trying to find another source now,” she said.Comments »
Kate Upton was revealed as cover model of the 2012 Sports Illustrated Swimsuit Issue during a taping of CBS’ The Late Show with David Letterman in New York Monday night.
SI unveiled a billboard of Upton’s cover image across from Letterman’s Ed Sullivan Theater in Manhattan. The 19-year old Florida native nabbed the coveted cover shot in only her second appearance. She was “Rookie of the Year” last year.
Among other SI models who appeared on the show: Julie Henderson, Jessica Gomes, Ariel Meredith, Alyssa Miller, Chrissy Teigen, Genevieve Morton, Izabel Goulart, Jessica Perez and last-year’s cover model Irina Shayk.
This year’s 2012 SI Swimsuit Issue hitting newsstands, the Web, tablets and iPhones today will feature 18 models and 6 athletes and will be read by an estimated 70 million adults.
Upton joins the list of other SI cover models, including: Kathy Ireland, Christie Brinkley, Cheryl Tiegs, Elle MacPherson, Tyra Banks and Brooklyn Decker.
She’s done TV work for MSG Network and caused a YouTube sensation by dancing the “Dougie” at a Los Angeles Clippers game.
Upton’s personal Web site describes her as the “next great Supermodel.” She was a competitive equestrian before turning to modeling.
She’s joined in this year’s issued by three male athletes: Olympic swimmer Michael Phelps; NBA star Chris Paul and tennis star Rafael Nadal.
And three female athletes wearing nothing but bodypaint: Olympic swimmer Natalie Coughlin; LPGA pro Natalie Gulbis; and U.S. women’s soccer star Alex Morgan.Comments »
FLASH: CARL “GIVE ME 3 SEATS ON YOUR FUCKING BOARD” ICAHN TELLS CVI TO SELL THE FUCKING COMPANY ALREADY
CVR Energy: Icahn spoke with mgmt and told them CVI would be better served if it commenced a process to put itself up for sale – amended 13D filing (26.96)
On February 13, 2012, Carl C. Icahn and other representatives spoke with Jack Lipinski, the Chairman, Chief Executive Officer, and President of CVI, and discussed the initiatives announced on February 13th. Icahn stated that they believed that shareholders would be better served if CVI commenced a process to put itself up for sale, rather than pursue the limited initiatives announced by the co. Icahn believes that CVI’s stock price does not reflect current high crack spreads. CVI is a small company with only two refineries. As a result, shareholders face an unfavorable risk reward ratio since they bear not only the risk of a decline in crack spreads, but also the risk of production interruptions which would reduce the upside from high crack spreads. Icahn expressed their belief that there are three or four possible acquirers that could benefit greatly from the synergies that could be realized from a combination with CVI and that are better positioned to hedge currently high crack spreads. Mr. Lipinski stated that he would take the Icahn’s suggestions under advisement and discuss them with his board of directors and advisors.
Alleged serial child rapist Jerry Sandusky — former Penn State asst. football coach — has been cleared by a judge to visit with his grandkids … as long as the parents arepresent during the encounter.
The judge also ruled that Sandusky can receive visits from adults.
The judge was clearly feeling generous to the former football coach … because he also shot down an attempt by prosecutors to have Sandusky confined indoors as he awaits trial due to a fear that he might rape local children.
Sandusky is already on home confinement … but prosecutors wanted Sandusky locked indoors over fears that he might make an effort to contact kids at an elementary schoolbehind his home.
Seriously, elementary school behind his home. Your stomach turning yet?
But the judge ruled there was not enough evidence to prove Sandusky was making “any effort to contact any of the children by signaling or calling to them, or that he made any gestures directed toward them, or that he acted in any inappropriate way whatsoever.”
Sandusky is due back in court in May … when he will face 52 counts of sexually assaulting boys over a 15-year span.
Hugh Hefner‘s oldest son Marston Hefner was arrested last night after he allegedly attacked his Playmate of the Year girlfriend Claire Sinclair … TMZ has learned.
Law enforcement sources tell TMZ … cops were called to the pad Marston shares with Sinclair in Pasadena, CA after one of Sinclair’s family members called 911, claiming Marston had attacked her.
Cops arrived to the scene … and we’re told officers observed visible injuries on Sinclair’s body … including bruises and red marks.
Law enforcement sources tell TMZ … Marston admitted the two had gotten into an argument … but did not cop to striking Sinclair.
Sources tell us … Sinclair told cops Marston had punched her, kicked her in the stomach and then refused to let her leave the residence. We’re told Sinclair called family members after the alleged attack … and her family called the cops.
After a brief investigation, Marston was arrested for misdemeanor domestic violence at around 11:15 PM … and hauled to a nearby police station where he was booked.
Marston was released on $20,000 bail a few hours later.
20-year-old Sinclair was named PMOY in 2011. She has been dating Marston on-and-off since August 2010.Comments »