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Dan Dorfman

Dan Dorfman

Posted: July 1, 2009 06:42 PM

The Return of Gordon Gekko


The villainous Gordon Gekko in the film, Wall Street, who illegally traded on inside information and won an academy award for actor Michael Douglas, may have been fictional, but apparently he has spawned a flock of real-life disciples.

Indicative of this, the Securities and Exchange Commission -- which has been roasted by the media and a host of investors for ignoring repeated early warnings about the fraudulent actions of Wall Street swindler Bernard Madoff -- has become a more aggressive cop on the securities beat, bombarding the brokerage community in recent weeks with at least 40 trading stock trading investigations.

The SEC's thrust: to determine who traded in the securities of those 40 companies both here and abroad and whether they did so by illegally capitalizing on non-public information. That, at least, is what the agency is signaling it suspects, based on its bombardment of inquiries to the brokerage firms.

"I don't know whether their screw-up with Madoff is what's prompting all these SEC investigations, but I can't recall so many of them popping up in such a short period of time," a compliance official at one brokerage told me.

In some cases, the latest information-seeking SEC's inquiries are a follow-up to previous trading probes, particularly in the banking arena.

Prominent in these trading probes are a goodly number of the country's best known financial names, such as the Goldman Sachs Group; JP Morgan Chase; Citigroup; Bank of America; Wells Fargo, and SunTrust Banks. Also piquing SEC interest is the trading that took place in such other financials as Meridian Interstate Bancorp, Colonial Bank National Association, Malvern Federal Bancorp. and Regions Financial Corp.

Wall Street speculation has it that some investors may have been privy to government actions involving a number of these banks at the outset of the financial crisis or to their financial results.

It should be duly noted these are not investigations of the companies themselves, but rather focus on the trading in their securities.

An SEC spokesman, Kevin Callahan, said the commission would neither confirm nor deny the existence of any trading investigations. But there's no question of their authenticity since I have obtained copies of private internal SEC documents that identify the 40 names.

Those highly volatile energy stocks are also conspicuous in the latest batch of SEC investigations. These include Valero Energy, Petrohawk Energy, Hercules Offshore, Delta Petroleum and Energy Infrastructure Corp.

Additional investigations, according to copies of the SEC documents, include Pepsiamericas, Pepsi Bottling Group., Cypress Semiconductor Corp., EMC Corp., Emulex Corp., Sun Microsystems, Hartford Financial Services Group, Genzyme and Centex Corp.

Rounding out the SEC's 40 trading investigations are American Axle & Manufacturing Holdings, Lincoln National Corp., Data Domain, NetApp, Gildan Activewear, Metlogic Microsystems, Novelous Therapeutics, Mf Global, Ltd., Tongxin Pharmaceuticals, Advanced Materials Group, Genta, Emisphere Technologies, Cypress Biosciences, Hana Biosciences and Indevus Pharmaceuticals and Cardiome Pharma Corp.