The Money-Running Dreams of Michael Sassano

Updated from 7:16 a.m. EST

Michael Sassano, the Oppenheimer & Co.(OPY - Cramer's Take - Stockpickr) stockbroker whose market-timing connections have caught the eye of regulators, wasn't content just to sit and watch while his investors got rich.

Sassano wanted to run his own hedge fund, according to several people who know him.

TheStreet.com reported Tuesday that Sassano has piqued the interest of securities regulators investigating improper trading in the mutual fund industry because of his reputation on Wall Street as someone with a big list of market-timing customers. That he coveted a vehicle to trade for his own account suggests Sassano had ambitions to leverage the culture of mutual fund market-timing that grew up around him in the late 1990s, and atop which, sources say, he sat.

New York Attorney General Eliot Spitzer's office has already subpoenaed records from Oppenheimer to learn more about how Sassano carved out his lucrative niche putting fast money together with mutual funds that could be market-timed. (Oppenheimer & Co. is unrelated to OppenheimerFunds.)

Market-timing is the term for a legal but strongly discouraged trading strategy in which mutual fund shares are bought and sold frequently to capitalize on price discrepancies in different markets. The rapid-fire trading is harmful for the vast majority of mutual fund investors because it can dilute the value of a fund by driving up trading and administrative costs.

Most fund companies disclose in their prospectuses that they try to ferret out and stop market-timers. But investigators have found that far too many fund companies were willing to bend or ignore those rules when it came to a privileged group of hedge funds and their brokers.

Sassano's interest in managing a hedge fund, however, puts a new wrinkle in this story because it shows how commonplace market-timing had become on Wall Street.

Back in 2001, Sassano approached a number of people at his then-employer, CIBC World Markets, about the possibility of running a hedge fund, several sources said. The 33-year-old broker even had a name picked out: Atlantique Capital Advisors.