2009-05-06

By Editor, CIR

The US Securities and Exchange Commission has brought its first case of alleged insider trading involving credit default swaps (CDSs).

The SEC accuses Jon-Paul Rorech, a bond salesman for Deutsche Bank, of passing confidential information to a hedge fund manager, netting him an instant profit of USD1.2 million.

The civil complaint, filed in New York, alleges that when Rorech was working on a high-yield bond issue for Dutch publishing firm VNU he tipped off a former portfolio manager at Millennium Partners about changes in VNU's debt offering in July 2006.

According to the SEC, the information would have had an impact in the credit default swap market, where bond buyers often buy insurance on bonds they own.

Scott W. Friestad, deputy director of the SEC enforcement unit, commented: "This is the first insider trading enforcement action involving credit default swaps.

"As alleged in our complaint, Rorech and Negrin checked their integrity at the door and schemed to engage in insider trading of CDS to the detriment of investors and our markets."

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