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

Bob Doll's Ten Market Predictions For 2016

Jan 7 2016 | 9:37pm ET

Well-known market strategist Robert Doll has published his annual list of ten predictions...

Lifestyle

Citadel's Ken Griffin Donates $40M To New York's Museum of Modern Art

Dec 22 2015 | 9:23pm ET

Citadel founder Ken Griffin has donated $40 million to New York’s Museum of Modern...

Guest Contributor

Hedge Fund Marketing - Making the Most of Your Salesperson

Jan 20 2016 | 8:11pm ET

In this contributed article, Bruce Frumerman of Frumerman & Nemeth takes a close...