Investigations of possible insider trading in corporate takeover deals involving hedge funds and private equity firms are on the rise at the U.S. Securities and Exchange Commission, SEC Chairman Christopher Cox said Wednesday.
"That is an increasing area of enforcement attention. We have a number of ongoing investigations. The pace of our investigative activity has been quickening on this for some months," Cox told reporters after a commission meeting.
His remarks came amid SEC probes of possible insider trading ahead of drugmaker GlaxoSmithKline Plc's bid for medical products maker CNS Inc.; mining group Barrick Gold Corp.'s deal with rival Placer Dome Inc.; and a two-firm private equity deal to buy out retailer Petco Animal Supplies Inc., among other transactions.
"Of course, insider trading is something the commission has attended to as a matter of its central responsibilities," said Cox when asked about the issue.
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He also said that the President's Working Group on Capital Markets, of which he is a member, earlier this month discussed government regulation of the hedge fund industry.
"At our most recent meeting, we discussed this," he said. "It's high on the agenda ... From our standpoint, we've been asked to describe both what we might do with our existing authorities and what we might do with different authorities."
The SEC attempted to impose increased regulation on the lightly policed hedge fund industry in 2004, but its rule requiring more fund advisers to register with the agency was thrown out by a federal court in June.
The Treasury Department, Federal Reserve and other agencies with jurisdiction over the $1.2-trillion hedge fund business have generally discouraged saddling it with more regulations.
At the SEC's meeting, Cox and his four colleagues voted unanimously to adopt a rule excluding executive pay deals from a rule saying all shareholders must get the best price on offer for their holdings in acquisitions known as tender offers.
Recent court decisions had caused uncertainty about the SEC's rule, according to SEC commissioners.
The measure adopted aims to clarify that the so-called "best price" offered to investors in a tender offer need not apply to employment compensation, severance or other benefit arrangements.
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