MANHATTAN (CN) – The SEC charged a former Millennium Partners hedge fund manager and a Deutsch Bank Securities salesman with insider trading in credit default swaps. The SEC said it’s the first enforcement action it has brought involving credit default swaps.
The SEC charged Renato Negrin, a former portfolio manager for Millennium Partners, and Deutsche Bank salesman Jon-Paul Rorech with insider trading in credit default swaps of VNU N.V., an international holding company that owns Nielsen Media and other media businesses.
In its federal complaint, the SEC claims that Rorech learned from Deutsche Bank investment bankers about a change to the proposed VNU bond offering that was expected to increase the price of the CDS on VNU bonds. Deutsche Bank was the lead underwriter for a proposed bond offering by VNU.
The SEC says Rorech illegally tipped Negrin about the contemplated change to the bond structure, and Negrin bought CDS on VNU for a Millennium hedge fund. When news of the restructured bond offering became public in late July 2006, the price of VNU CDS substantially increased, and Negrin closed Millennium’s VNU CDS position at a profit of approximately $1.2 million, according to the complaint.