Hedge Fund Fontana Rapped For ‘Shorting Into The Deal’

Jan 10 2011 | 5:35am 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

Q&A: Decathlon Capital On Revenue-Based Alternative Lending

Oct 30 2017 | 3:49pm ET

The explosion in private credit activity since the end of the financial crisis is...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Saxby: Not All EBITDA Is Created Equal

Nov 30 2017 | 8:02pm ET

Record levels of dry powder are driving competition among private equity firms to...