SEC Fines Two Hedge Funds For ‘Shorting Into The Deal’

Jan 27 2010 | 3:42am ET

Two Los Angeles-based hedge funds have settled charges they illegally shorted stocks before participating in secondary offerings.

AGB Partners and Palmyra Capital Advisors are the first firms charged by the Securities and Exchange Commission under a revised rule barring so-called “shorting into the deal,” which forbids participants in secondary offerings from shorting the shares five days before the pricing of an offering.

“Rule 105 protects the pricing integrity that is essential to the capital raising process,” Marc Fagel of the SEC’s San Francisco office said. “By engaging in prohibited trading, these firms illicitly profited at the expense of public companies and their shareholders.”

Neither AGB nor Palmyra admitted or denied the charges. The latter agreed to pay more than $330,000 in disgorgement and penalties, while the former—along with its principals, Gregory Bied and Andrew Goldberger—will pay more than $50,000. Palmyra, AGB, Bied and Goldberger were all censured.

AGB, Bied and Goldberger argued that their trading fell under a loophole in Rule 105, designed to allow brokerages to both short a stock and buy it in a secondary offering on behalf of two different clients. But the SEC found that Goldberger’s and Bied’s “close collaboration with the accounts” mean the loophole didn’t apply to AGB.


In Depth

Whisky Business: The Ultimate Liquid Alternative Investment

Sep 15 2014 | 7:02am ET

David Robertson knows his single-malt whisky—he was the Master Distiller at the...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

The Cult of Loss Aversion: A Call to Rethink Risk in Global Macro Investing

Sep 4 2014 | 5:45am ET

In the wake of a traumatic loss, whether it is financial or personal, it is just...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

In search of the ‘new normal’ at the Fed

The Federal Reserve keeps baby-stepping toward a “normalization” of monetary policy. But just what is normal?

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.