Wires

UPDATE 1-FINRA fines Guggenheim for failing to supervise two CDO traders

Share

(Adds company comment)

Oct 11 (Reuters) - Guggenheim Securities LLC has beenordered to pay a fine of $800,000 for failing to supervise twoformer traders who tried to hide a trading loss in 2008, WallStreet's industry-funded regulator said.

The Financial Industry Regulatory Authority (FINRA) alsosuspended Alexander Rekeda, the former head of Guggenheim'scollateralized debt obligation (CDO) desk, for one year andfined him $50,000. Timothy Day, a trader on Guggenheim's CDODesk, was suspended for four months and fined $20,000.

FINRA said the traders, who had lost money on a 5 millioneuro ($6.45 million) junk-rated collateralized loan obligation,tricked a hedge fund into overpaying for the CLO by falselypresenting it as part of a package offered by a third party.

After the customer queried the pricing, the traders and thehedge fund reached a deal under which the hedge fund agreed tooverpay in return for cash and breaks on fees, FINRA said.

FINRA, which does not regulate hedge funds, did not identifythe hedge fund.

"Guggenheim's inadequate supervision allowed their tradersto engage in extensive and repeated inappropriate actions to tryto conceal a trading loss," Brad Bennett, FINRA's vice presidentand chief of enforcement, said in a statement.

"Today's settlement relates to sales practices by two formeremployees of Guggenheim Securities," a Guggenheim spokesmansaid, adding that the firm had cooperated fully with FINRAthroughout its investigation.

As part of the settlement, Guggenheim has to retain anindependent consultant to review its supervisory procedures.($1 = 0.7751 euros)

(Reporting by Sharanya Hrishikesh and Anil D'Silva inBangalore; Editing by Sreejiraj Eluvangal)

((sharanya.hrishikesh@thomsonreuters.com)(within U.S. +1 646223 8780)(outside U.S. +91 80 4135 5800)(Reuters Messaging:sharanya.hrishikesh.thomsonreuters.com@reuters.net))

Keywords: FINRA GUGGENHEIMSECURITIES/