Arthur Samberg, one of the biggest names in hedge funds for more than two decades, has been warned he could face insider dealing charges.
The US Securities and Exchange Commission has sent Mr Samberg a so-called Wells notice, a formal notification that it is considering a civil lawsuit against him and his firm, Pequot Capital, which is being wound down.
The SEC's likely action against Mr Samberg, 68, relates to contacts he had in 2001 with an employee at Microsoft, when Pequot was betting on the software giant's share price. The SEC has pursued other insider dealing investigations into Pequot in recent years, after stock exchange monitoring revealed more than 40 suspicious trades by the firm, but no others produced evidence of wrongdoing.
Insider dealing rumours have dogged Mr Samberg for years, possibly because he is so well connected on Wall Street. Pequot, founded in 1986, was once the largest hedge fund. In 2006, investigations into its conduct threatened to drag in John Mack, the chief executive of Morgan Stanley, who is an old friend of Mr Samberg and was briefly chairman of Pequot.
A former SEC employee said his inquiry into Pequot led him to conclude Mr Mack had been passing information to the hedge fund at the beginning of the decade, but superiors did not agree Mr Mack should be subpoenaed and, after rowing over the issue, the officer was sacked in September. Mr Mack said the claims were untrue and he was never contacted by the SEC.
The SEC renewed its interest in Pequot in January following new information about trading in Microsoft shares in 2001. When news of the investigation became public, Mr Samberg closed Pequot, telling investors in May that the investigations "cast a cloud over the firm and have become a source of personal distraction".
Byron Wien, Pequot's former chief strategist who previously worked for two decades at Morgan Stanley, wrote a public letter last month defending Mr Samberg. "I will never believe he has done anything wrong," he wrote.Reuse content