July 24 (Bloomberg) -- A hedge fund trader pleaded guilty to buying and selling stocks based on tips about changes in UBS AG analyst ratings, becoming the seventh person convicted in the biggest federal insider trading crackdown since the 1980s.

Mark Lenowitz of Norwood, New Jersey, admitted he used inside information about planned ratings changes when he traded securities at hedge funds Chelsey Capital and Q Capital Investment Partners LP, both in New York, earning more than $337,500. He pleaded guilty to conspiracy and securities fraud.

``I knew that my conduct was wrong,'' Lenowitz told U.S. District Judge Sidney Stein today in New York federal court.

U.S. prosecutors have stepped up efforts to crack down on insider trading. Lenowitz, 43, was among 13 people charged March 1 in separate insider trading indictments against employees at Zurich-based UBS, Europe's biggest bank, as well as New York- based banks Morgan Stanley and Bear Stearns Cos.

A Pakistani investment banker was accused in June of trading on inside information fed to him by a counterpart at Zurich-based Credit Suisse Group. Also in June, a Morgan Stanley compliance officer and her husband pleaded guilty to insider-trading charges and another official at the firm and her husband were arrested on identical charges.

Tipped

Lenowitz's defense attorney Alan Vinegrad declined to comment. The maximum sentence for conspiracy is five years, and the maximum term for securities fraud is 20 years. A sentencing date hasn't been set, according to court records.

The former trader said he learned of the imminent ratings changes by another hedge fund trader, Erik Franklin, who prosecutors said got his information from Mitchel Guttenberg, then an executive director in UBS's equity-research department.

Franklin, who traded hundreds of stocks from 2001 to 2006 based on the tips, previously pleaded guilty to fraud charges. Guttenberg has pleaded innocent.

Guttenberg, Franklin and those they tipped made at least $14 million in illegal profits, the Securities and Exchange Commission said in a related civil complaint. Lenowitz earned more than $2 million on his trades in 2002 and 2003, according to the SEC.

UBS Spokesman Doug Morris declined to comment. Spokespersons for Q Capital and Chelsey couldn't immediately be reached for comment. UBS and Chelsey Capital said in March they were cooperating with investigators.

Traded

Lenowitz admitted that he traded on Oct. 3, 2002, after learning that UBS would lower its rating on Tenet Healthcare Corp., the largest publicly owned U.S. hospital chain. He said he earned $337,500 by betting that Tenet shares, and those of other companies, would rise or fall after ratings changes.

The government said its investigation uncovered one of the biggest insider-trading cases since the 1980s. According to the SEC, which sued 14 defendants in March, the alleged scheme stretched over five years, included hundreds of tips and produced more than $15 million in illegal profits.

Linda Thomsen, the SEC's enforcement chief, described the crackdown as ``one of the most pervasive Wall Street insider trading cases since the days of Ivan Boesky and Dennis Levine.''

In the 1980s, Levine was charged with running a trading ring that included a takeover lawyer at Wachtell, Lipton, Rosen & Katz and an investment banker at Lazard Freres & Co. Arrested in 1986, Levine pleaded guilty to securities fraud and was sentenced to a two-year term, much of it served at a halfway house.

Boesky was sentenced to three years in prison for insider trading, after giving evidence against Michael Milken, the former junk bond chief from Drexel Burnham Lambert Inc. who served prison time for securities fraud.

The case is U.S. v. Lenowitz, 07-cr-146, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: David Glovin in U.S. District Court in New York at dglovin@bloomberg.net.

Last Updated: July 24, 2007 18:24 EDT