November 12, 2009 / 10:25 PM / 10 years ago

UPDATE 3-US SEC expects to proceed with Bear Stearns case

* SEC expects to proceed on Bear hedge fund managers case

* Bear managers were acquitted Tuesday

* SEC eyes improving Wells notice process (Adds attempts to reach Cioffi, Tannin lawyers)

WASHINGTON, Nov 12 (Reuters) - U.S. securities regulators intend to proceed with their civil case against two former Bear Stearns fund managers who were acquitted of related criminal charges earlier this week.

“We filed a case based on the evidence from our investigation,” Robert Khuzami, the enforcement chief at the U.S. Securities and Exchange Commission, told Reuters TV on Thursday. “We fully expect to proceed with our case.”

On Tuesday, a New York jury found the former Bear managers Ralph Cioffi and Matthew Tannin not guilty of securities fraud, wire fraud and conspiracy.

They had managed two hedge funds that were full of subprime mortgage-backed securities and which the government said led to $1.6 billion in losses for investors when they collapsed in mid-2007, in the early stages of the financial crisis.

It was the first major criminal trial to arise from the financial meltdown, and was seen as a test case for prosecuting people for their roles in the crisis.

“We will study the transcript and events at trial, but I fully expect us to continue our case. We have a different standard of proof,” Khuzami said.

Lawyers for Cioffi and Tannin could not immediately be reached for comment.

Some have questioned whether Tuesday’s decision would make authorities less likely to proceed with other cases. Khuzami rejected that suggestion.

“The fact that these two individuals were acquitted from the charges ... doesn’t mean that somebody alleged to be engaged in other misconduct should not be prosecuted because there was an acquittal,” he said. “Nor does it mean that, if there was conviction, that other people should be prosecuted.”

Bear Stearns was acquired last year by JPMorgan Chase & Co (JPM.N) in a government-assisted sale.

Separately, Khuzami said he was focused on making the agency’s “Wells notice” more efficient.

The Wells notice is a letter the SEC sends to an individual or firm alerting them that it is considering filing civil charges and giving the recipient a chance to respond.

Khuzami wants to preserve the Wells notice, but said there may be changes in just how long the process takes.

“Sometimes it can perhaps drag on longer than it should. Some of that is a result of our own internal procedures,” he added. (Reporting by Rachelle Younglai and Sandra Abrams; editing by Andre Grenon)

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