Insider Trading Watchdog Moves to Hedge Fund

Richard Zabel—the right-hand man of Manhattan District Attorney Preet Bharara—has joined a number of other high-profile securities regulators in departing for the private sector.

Elliott Management has hired Zabel as general counsel, its top in-house legal position. The New York City-based holding company is one of the world’s largest hedge fund firms with an estimated $23 billion under management.

According the US Attorney’s Officer for the Southern District of New York, Deputy Attorney Zabel first joined and began prosecuting securities fraud cases in 1991. He rose to second-in-command of the narcotics unit in 1996, then left three years later to spend a decade in private practice at Akin Gump Strauss Hauer & Feld.

Zabel rejoined the Manhattan prosecutor’s officer—which covers Wall Street—in 2009. Since then, he has served as Bharara’s deputy in a crackdown on insider trading, together winning more than 80 convictions.

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“I’m very, very sad to see him go,” Bharara told Bloomberg in an interview. “Not just because he’s an amazing lawyer, but an amazing friend to me.”

Elliott Management confirmed the hiring when reached by CIO, but declined to make further comment.

The US Securities and Exchange Commission (SEC) may file civil charges against State Street Corporation over its methods in soliciting public pension mandates.

In a Wells notice—usually sent after the regulator determines sufficient wrongdoing—the SEC said it intends to claim the Boston-based firm violated securities laws.

“Since 2011, we have enhanced our compliance training and oversight for employees in the US public pension plans sector.” —State Street spokespersonThe company said the SEC’s investigation involves its use of consultants and lobbyists as well as at least one instance of political contributions by a consultant during and after a public bidding process.

The probe, first disclosed in November 2014, is focused on State Street’s relationships with pension plans in two states during a period ending in 2011, the firm said.

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A spokesperson for State Street told CIO the firm “eliminated the hiring of consultants and lobbyists for our asset servicing dealings with US public retirement plans in support of our sales efforts” three years ago.

“Since 2011, we have also enhanced our compliance training and oversight for employees in the US public pension plans sector,” she continued.

Furthermore, the spokesperson said State Street has retained 20 of 21 existing public pension fund clients’ asset-servicing contracts over the past two years.

“No person or entity was retained to solicit these businesses on State Street’s behalf and the proposals were evaluated independently on their merits,” she added.

State Street confirmed it would submit a response to the Wells notice to the SEC before the regulator decides whether or not an enforcement action is warranted.

In a quarterly filing last November, the firm declared unfavorable outcomes from the investigation could cause “a material adverse effect on our business and reputation.”