11/11/2009

Ex-Balyasny Pro Eyed in Insider-Trading Case

The SEC has extended the reach of its insider-trading probe by looking into the activities of a stock analyst who worked at Balyasny Asset Management until just several weeks ago.

The Chicago firm informed its investors of the investigation over the weekend and told them that it had invited the SEC to look into its books to verify the actions of the unidentified individual. It also reassured investors that the probe focused on the analyst, not the firm as a whole.

The analyst worked as part of Balyasny's extensive group of research professionals from early 2008 until recently. The firm now employs some 80 researchers and portfolio managers, many who work in New York. It couldn't be learned whether the analyst was dismissed by the firm or left voluntarily.

After learning in recent weeks that the commission was investigating the analyst's activities, Balyasny conducted an internal review of its operations with the help of an outside specialist. The review found no improprieties at the firm, which oversees $2 billion of investments, about half through its flagship vehicle, Atlas Global fund. Atlas Global, which follows diversified-equity and global-macro strategies, has produced gains each year since its inception in 2002.

"We've a very long history of compliance and take it extremely seriously," said Balyasny vice chairman Barry Colvin. "We've always attempted to do the right thing, as was demonstrated through these circumstances."

Balyasny has become the third major hedge fund operator with high trading turnover ensnared in SEC's latest insider-trading probe, along with Galleon Group and SAC Capital. Last month, the U.S. government brought a ground-breaking insider-trading case against Galleon founder Raj Rajaratnam and five others.

And last week, prosecutors said a former SAC portfolio manager, Richard Choo-Beng Lee, agreed to plead guilty and cooperate with their investigation. He worked at the Stamford, Conn., firm from 1999 to 2004. SAC said this week that it conducted its own investigation of the matter and found no suspicious activity.

In all, 20 individuals have been charged in the insider-trading case since Oct. 16. With the help of new technology, the SEC is probing a number of individuals who followed similar trading patterns ahead of market-moving corporate announcements.

The federal government alleges the defendants cleared $53 million through illegal trades dating back as far as 2006 and covering about a dozen equities. Stocks cited by prosecutors include Advanced Micro Devices, Google, Hilton Hotels, Intel and International Business Machines.

Balyasny was established in 2001 by Dmitry Balyasny, who was previously a star trader of Schonfeld Securities.

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