Securities and Exchange Commission
and the U.S. attorney charged more than a dozen individuals with participating in insider trading schemes that brought in more than $15 million in profits.
Regulators say the schemes involved illegal trading ahead of upgrades and downgrades by analysts at
, as well as corporate acquisition announcements from investment banking clients of
The SEC alleges that eight Wall Street professionals -- including a senior UBS research analyst and a former compliance officer for Morgan Stanley, two broker-dealers and one day-trading firm -- participated in the scheme. The agency says the acts violated antifraud provisions of federal securities laws. Beneficiaries of the alleged scheme included three hedge fund firms.
According to the SEC complaint, Mitchel Guttenberg, an executive director in UBS' equity research department, provided material, nonpublic information on upcoming ratings changes to two traders: Eric Franklin of hedge fund Lyford Cay and David Tavdy of Andover Brokerage. The SEC says that Franklin and Tavdy also had a network of traders that illegally traded on this inside information.
The agency alleges the network included another hedge fund, a day-trading firm and three representatives at
Traders also used stolen information from Morgan Stanley's investment bank ahead of corporate acquisition announcements, it says.
Separately, the U.S. attorney for Southern District of New York indicted Guttenberg, former Morgan Stanley compliance officer Randi Collotta and 11 other individuals for insider trading.
Collotta quit her position at Morgan Stanley in mid-2005 before the investigation began.
first reported that the SEC was looking into whether UBS was involved in
improperly providing advance notice of upcoming changes in analyst stock recommendations.
"The ringleaders of the UBS part of the scheme went to great lengths to hide their illegal conduct, first through a clandestine meeting at Manhattan's famed Oyster Bar and eventually the use of disposable cell phones, secret codes and cash kickbacks before the scheme unraveled," the SEC says.
The SEC is seeking "permanent injunctive relief, disgorgement of illicit profits with pre-judgment interest and the imposition of civil monetary penalties."
The investigation at UBS comes three years after 10 big Wall Street firms, including UBS, paid $1.4 billion in fines to settle allegations that research analysts conspired with investment bankers to issue favorable ratings on stocks. The research settlement tarnished the reputation of Wall Street stock research and gave analysts a black eye.
UBS is "assisting the authorities to the fullest extent possible in their investigation into the alleged actions of a single UBS employee," according to a company statement. "UBS is committed to safeguarding the integrity of its proprietary information and has rigorous procedures in place to avoid any theft or misuse. Any violation of these procedures is taken extremely seriously."
A Morgan Stanley spokesman said the firm has "cooperated and are continuing to cooperate with authorities regarding a former employee who allegedly stole information."