Senate report faults SEC on hedge fund probe

Sat Aug 4, 2007 5:25pm BST
 
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By Kevin Drawbaugh

WASHINGTON (Reuters) - The Securities and Exchange Commission mishandled an investigation of suspicious hedge fund trading that led to the 2005 firing of an SEC attorney, a U.S. Senate report says.

The report from the Senate Finance and Senate Judiciary committees, released late on Friday, ends a year-long inquiry into the dismissal of former SEC staffer Gary Aguirre.

Aguirre says he was forced out of the agency after a probe he was leading got too close to prominent Wall Street banker John Mack. His claims prompted three Senate hearings and drew heavy press coverage.

The final Senate report criticized SEC management of the investigation and expressed concerns about whether allegations of improper political influence had damaged the agency.

"The public airing of evidence in support of those allegations undoubtedly had an adverse impact on public confidence in the SEC," the report said.

"However, the controversy is more than merely an issue of perception. Our investigation uncovered real failures that need real solutions," the report said.

It recommended that the SEC, among other steps, standardize investigative procedures; make supervisors keep records on outside communications involving investigations; and improve the independence of its internal inquiry staff.

"We will follow up on the report and recommendations ... with energy and urgency," SEC Chairman Christopher Cox said.  Continued...

 
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