Wednesday, 23 July 2014
Last updated 5 hours ago
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.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…