SEC Settlement Against Former Bear Stearns Managers Approved
By: Esther Cho
A civil litigation case brought on by the Securities and Exchange Commission (SEC) against two former portfolio managers with Bear Stearns was settled and received approval from the U.S. District Court for the Eastern District of New York.
The court approved the settlement on June 18, 2012, and Ralph R. Cioffi and Matthew M. Tannin were ordered to pay a total of $1.05 million in disgorgement and civil penalties, the SEC announced Monday.
The SEC’s complaint, which was first filed June 19, 2008, alleged that the Bear Stearns funds collapsed in June 2007 due to risky subprime mortgage-backed securities. Cioffi was the senior portfolio manager, and Tannin was a portfolio manager and chief operating officer for the failed hedge funds.
According to the SEC’s complaint, Cioffi and Tannin misled investors about the financial condition of the funds and degree to which the funds had actually been invested in securities backed by subprime mortgages. The collapse of the funds was said to cause investors to lose $1.6 billion.
However, in a November 2009 federal court ruling, Cioffi and Tannin were found to be not guilty of fraud related to investments in risky subprime mortgage pools, leading the SEC to pursue a civil case against the two managers.
Cioffi and Tannin settled the SEC’s charges, without admitting or denying the allegations in the complaint. Cioffi was ordered to pay $700,000 in disgorgement and a $100,000 civil penalty, and Tannin was ordered to pay $200,000 in disgorgement and a $50,000 civil penalty.
As part of the settlement, the SEC also issued orders barring Cioffi and Tannin from associating with industries regulated by the SEC for periods of three years and two years, respectively.
In 2008, JPMorgan Chase purchased Bear Stearns for $2 a share.
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