June 09,2009

Grassley checks SEC handling of previous allegations to help avoid repeat of mistakes

WASHINGTON – Following the closing of Pequot Capital Management, Senator Chuck Grassley is asking the Securities and Exchange Commission for information about the total number of suspicious trading referrals it received about the investment fund and how those allegations were handled by the regulator.

In a letter to the Chairman of the SEC, Grassley recalled how Senate investigators three years ago had found that the SEC quickly narrowed its focus regarding Pequot before substantial investigative steps had been taken regarding allegations made by Self- Regulatory Organizations about suspicious trades. Findings of the Senate investigation conducted by Grassley and Senator Arlen Specter were released in August 2007. The report is posted at http://finance.senate.gov. Click on legislation, scroll through Legislative Archives and search by date.

“The mishandling of the case that resulted in the 2007 report was a violation of the public trust by the agency that’s supposed to protect investors and maintain a fair market,” Grassley said. “I asked for more information today as part of an effort to follow up on our previous inquiries and find out how much has improved.”

Last month, Grassley received a letter from Chairman Mary L. Schapiro indicating that the recommendations made in this report had been implemented. The changes have standardized procedures, prioritized resources, increased transparency of external communications and internal recusals, established guidelines for handling employee complaints and dismissals, protect whistleblowers and recognize the independence of the Inspector General for the SEC.

Grassley also won additional resources for the Inspector General of the SEC as part of anti-fraud legislation that became law in May.

The text of Grassley’s letter to Schapiro is below.

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