A former portfolio manager at hedge fund Millennium Partners and a salesman at Deutsche Bank have been charged by the Securities and Exchange Commission (SEC) with insider trading in credit default swaps (CDS). The SEC said it was first such case involving CDS.

The SEC alleges that Paul Rorech, a salesman at Deutsche Bank, passed on information regarding changes to a bond offering being underwritten by the bank to Renato Negrin, who was at Millennium Partners at the time.

The changes were expected to increase the price of CDS on the bonds. Negrin purchased CDS for a Millennium hedge fund and closed out his positions at a profit of around $1.2 million when information about the changes to the bond offering became public.

The case was handled by the SEC enforcement division's hedge fund working group, which is investigating fraud and market manipulation by hedge fund investment advisers. SEC chair Mary Schapiro recently said the agency was conducting about 150 investigations into hedge funds and 50 investigations into CDS and other financial derivatives.

Rorech and Negrin have denied the charges.

Millennium Partners said it had co-operated with the SEC's investigation. It also stated it had not been accused by the regulator of any improper conduct.

"We have a zero tolerance policy toward insider trading and Millennium requires every employee to certify annually that they are aware of and in compliance with our policies," said Israel Englander, chairman and chief executive of Millennium in a statement. "Millennium employs a small army of compliance personnel who conduct surveillance, review emails and make every effort to deter or prevent any illegal or improper activity," he continued.