According to the New York Times Online edition, the SEC has sent letters of inquiry to four major investment banks: UBS, Merrill Lynch, Morgan Stanley, and Deutsche Bank. The letters apparently request all stock and options trading activity for the last two weeks of September, the close of the third quarter.

Presumably, the SEC is looking into large block trades to try to determine if certain traders or hedge funds were able to access this data before trades were executed. Prior knowledge of large market-moving trades would put an individual trader at an advantage by knowing how the market will react before it is actually affected.

The investigation seems to be focusing on whether large brokers are tipping off preferred clients (or insiders at the bank who may be trading independently) before executing large orders.

In unrelated news, RenaissanceRe has settled securities fraud charges with the SEC by agreeing to retain an independent consultant and pay a fine of $15 million. RenRe’s fraud involved a phantom transaction for $26 million that allowed the company to defer revenues from 2001 to 2002 and 2003. You can read the whole article at the SEC’s website.

This entry was posted on Tuesday, February 6th, 2007 at 4:58 pm and is filed under Uncategorized, Stock Market. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.