Hedge Fund Fontana Rapped For ‘Shorting Into The Deal’

Jan 10 2011 | 4:35am ET

Hedge fund Fontana Capital illegally sold short shares of three financial companies two-and-a-half years ago.

The Boston-based firm, founded by SAC Capital Advisors veteran Forrest Fontana, violated Rule 105, which bars participants in secondary offerings from shorting shares of the company five days before the offering’s pricing. The hedge fund made more than $1 million in illegal profits, according to an SEC administrative cease and desist order.

Fontana’s lawyer, Lisa Wood, told Reuters that the firm does not deny that it broke Rule 105, but said that the violations were “isolated, inadvertent, technical.” She added that two sides disagreed “over the measure of damages.”

According to the SEC, Fontana, which effectively shut its doors last year, illegally shorted shares of Merrill Lynch, XL Capital and Wells Fargo in 2008.

With Fontana contesting the charges, the hedge fund will now face a hearing within 60 days.


In Depth

Debunking Conventional Investment Wisdom

Feb 8 2017 | 3:22pm ET

Due diligence in the hedge fund world has long involved some combination of the...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

iCapital Network: The Trump Effect On Direct Lending

Feb 23 2017 | 4:21pm ET

The arrival of the Trump Administration has raised questions among private debt...

 

From the current issue of