The SEC announced that it will continue to pursue its civil enforcement case against former Bear Stearns High Grade Fund portfolio managers Ralph Cioffi and Matthew Tannin, after the recent acquittal of criminal charges against Messrs. Cioffi and Tannin. According to recent news reports, Robert Khuzami, head of enforcement at the SEC, told Reuters TV, “We filed a case based on the evidence from our investigation.” Mr. Khuzami added, “we have a different standard of proof.”
The SEC’s complaint (available on its website) is indeed far more broad than the charges lodged by the U.S. Attorneys’ Office in Brooklyn. It also reaches all of the way back to the beginning of the High Grade Fund’s existence as opposed to just the late 2006, early 2007 time period the prosecutors focused on. The prosecutors’ standard of proof of “beyond a reasonable doubt” is much stiffer than the SEC’s and civil litigants’ standard of “by a preponderance of evidence.” In order for Messrs. Cioffi and Tannin to re-enter the securities industry, they will have to defend the SEC action as well.