Securities and Exchange Commission (SEC) is facing new questions about its response to “red flag” warnings of suspected wrongdoing in connection with allegations of insider trading at the now defunct investment bank Lehman Brothers.
Republican senator Charles E Grassley has written to the watchdog asking if the allegations – supplied to the SEC by former Lehman Brothers analyst Ted Parmigiani – are being followed up, the New York Times reports.
He said he was asking the commission to detail its response “in light of the SEC’s failure to follow up on repeated warning about the Madoff Ponzi scheme”.
Parigiani is believed to have supplied the SEC with around 4,000 emails and other documents detailing the alleged insider dealing. The case centres on employees in Lehman’s Product Management Group, who are accused of tipping off traders about non-public research reports.
Senator Grassley said many of the documents raise suspicions of insider trading, yet “it is unclear whether the SEC has issued a formal order authorising the enforcement staff to subpoena records and take sworn testimony”.
In December, the SEC launched an internal investigation into its apparent failure to follow up on “credible and specific” allegations regarding Bernard Madoff dating back to 1999.
L.D.