SEC To Question Morgan Stanley CEO Regarding Insider Trading At Hedge Fund

Before joining Morgan Stanley as Chief Executive Officer, John Mack was chairman of Pequot Capital Management Inc., a $7 billion hedge fund that is being investigated for possible insider trading.

Hedge funds, private investment pools traditionally targeted to wealthy individuals and institutions, are not regulated as closely as are other investments. Since 2001, the assets invested in hedge funds have more than doubled.

Questioning Mr. Mack, the top executive of one of the world’s largest securities firm, seems to suggest that the SEC is responding to criticism that it hasn’t done a better job policing the $1.2 trillion hedge-fund industry.

As J. Boyd Page, senior partner of Page Perry, observed:

It’s a strong step by the Commission. Wall Street is known for close relationships and conflict of interest at times, and the only way you can really clear them up is by fully vetting what happened. If that involves a senior executive, then so be it.

Bloomberg, July 21, 2006, Morgan Stanley’s Mack Faces SEC Interview on Pequot