Bain Hedge Fund Fined For Shorting Into The Deal

Jun 29 2011 | 4:07am ET

Bain Capital's hedge fund unit has agreed to return $1.7 million it earned for buying stock it had shorted three days earlier.

Boston-based Brookside Capital Partners earned the haul two years ago, participating in a Lincoln National Corp. stock offering just three days after shorting 600,000 of the company's shares. Investors are barred from participating in offerings within five days of shorting a stock, a practice known as shorting into the deal.

According to the SEC Daily Digest, “In June 2009, a fund managed by Brookside bought stock through a public offering after changing its investment thesis, even though the same fund had sold the same stock short three days before during the restricted period.”

Brookside was ordered to pay $1,658,660 in disgorgement and $90,419.22 in prejudgment interest, along with a $375,000 civil monetary penalty.

A Brookside spokesman said the firm cooperated with the SEC, paid all associated costs, and its funds were not harmed.


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