SEC Sends First Subpoenas in Investigation of Stock-Market Drop

Discussion in 'Wall St. News' started by ASusilovic, May 12, 2010.

  1. May 12 (Bloomberg) -- U.S. Securities and Exchange Commission Chairman Mary Schapiro said the agency’s enforcement unit has issued subpoenas in an investigation of last week’s stock plunge.

    The division is “fully integrated in our review of the events of May 6 and will recommend appropriate action” if violations are found, Schapiro told a House Financial Services subcommittee yesterday. “A number of subpoenas” were sent, she said, without identifying recipients.

    SEC investigators began preparing for a variety of inquiries in the hours after the Dow Jones Industrial Average briefly dropped as much as 9.2 percent, people familiar with the matter said last week. Regulators haven’t found evidence the incident was triggered by computer hackers, terrorists, malicious traders or a so-called fat finger entering an oversized order, Schapiro told lawmakers.

    The SEC is also concerned that firms or exchanges may have lacked required controls to prevent the rout from snowballing, people familiar with the matter said. It will also look at whether traders tried to take advantage of the chaos by steps such as entering orders that drove down some stocks.

    “We may learn that the extraordinary disruption in trading, however it may have been triggered, was the result of a confluence of events which, taken together, exacerbated what already had been a down day,” Schapiro said yesterday. “We are not prepared at this time to draw that conclusion.”


    The CFTC is examining the 10 traders holding the biggest long positions in the S&P 500 E-mini and the 10 traders with the biggest shorts on the contract, Chairman Gary Gensler said. The agency sent letters to market participants seeking data on their positions and “all communications related to trading” on May 5 and May 6, he said.

    A number of subpoenas. I am impressed. This was faster than with Madoff.
  2. pupu