Crestview Punished Over Compliance Issue

Feb 27 2007 | 12:51pm ET

The Securities and Exchange Commission on Feb. 26 settled civil injunctive actions against a Northbrook, Illinois hedge fund adviser, Crestview Capital Partners, and managing member Stewart Flink. Both are charged with making fraudulent representations in connection with investments in two registered direct offerings, which are privately negotiated sales of securities by public companies pursuant to an effective shelf registration statement.

According to the SEC, the Crestview funds agreed to invest $1.4 million in a registered direct offering by Introgen Therapeutics that was publicly announced on November 26, 2003 and $1.25 million in a registered direct offering by Targeted Genetics Corporation that was publicly announced on February 2, 2004. As a condition to participating in the offerings, Introgen and Targeted Genetics wanted assurance from the hedge fund in the form of subscription agreements that it had not shorted Introgen and Targeted Genetics stock respectively in the 10 days prior to the execution of the direct offerings.
 
Flink allegedly signed the Introgen and Targeted Genetics subscription agreements knowing Crestview funds had shorted 108,218 and 255,000 shares respectively of Introgen and Targeted Genetics stock resulting in profits of $197,000 in the short sales.

Without admitting or denying the SEC’s allegations, Crestview agreed to pay $394,640 in disgorgement and civil penalties and to retain an independent consultant to monitor its compliance procedures for 18 months and to report to the SEC staff every six months during the 18-month period. Flink also agreed to pay a $120,000 civil penalty.


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