Hedge fund Carlson Capital has settled charges that it violated short-selling rules governing public stock offerings.
The Dallas-based hedge fund, without admitting or denying the Securities and Exchange Commission allegations, agreed to pay $2.7 million to settle the charges, including $2.3 million in disgorgement. According to the SEC, the hedge fund four times violated its “antimanipulation” Rule 105, which bans investors with a short interest in a stock five days before an offering from participating in that offering.
The SEC also charged the firm with have “insufficient” preventative policies.
In addition to paying the fine, Carlson accept a censure and an order barring it from further violations of Rule 105.
“Investment advisers must recognize that combined trading by different portfolio managers can still constitute a clear violation of Rule 105 when short selling takes place during a restricted period," said SEC associate enforcement director Antonia Chion. "This is true even when the portfolio managers have different investment approaches and generally make their own trading decisions.”