A service which supplied Mafia-styled hits on fund managers has been uncovered. The scheme, offered by a firm which conducts research on fund managers, secretly reported fund managers to regulators, using fabricated information to falsely implicate them for fraud and regulatory violations, writes our investigative reporter Ken Howard. When hedge fund managers or investment firms became too good for their boots, there was a simple way to deal with them. Put a contract out and remove them from the equation. It was a simple no frills operation, executed with incredible success. The elaborate scheme was implemented in about 2007 and continued for several years. The SEC, desperate to re-establish its credibility after the Madoff scandal, welcomed information that would incriminate traders or investment managers on Wall Street. The researcher who was executing the “hit” would receive payment from two sides: the investment company who was putting out the contract and the SEC.

Smaller firms with $500 Million AUM or less, in many cases didn’t have the resources to fight a full blown legal battle with the SEC, which often could run into millions of dollars. The result was that they buckled and pushed for a quick settlement, even if they were innocent and had to admit guilt. It was an easy way for traders to eliminate the enemy. Peter Dreyfus, a long standing investment banker said, “No one will say it out loud, but everyone knows if you don’t like a competitor, just turn the regulators on him.”

With the appointment of a new SEC chief, Chairman Jay Clayton, the SEC has become more discerning with the information it receives. Accordingly, the-under-the-radar Mafia style hit-operation was effectively shut down. People in the know, say that the scheme would probably have never have been formerly sanctioned by SEC officials. The official line is and always will be, “Information is always welcome, but we will investigate it thoroughly.” For more visit https://www.sec.gov/news/press-release/2013-169