Canadian Hedge Fund Rapped For Trading Without A License

Apr 27 2012 | 4:31am ET

A Toronto hedge fund and its manager have settled allegations that they sought to evade Ontario's registration rules.

The Ontario Securities Commission accused Daniel Sternberg and his Parkwood GP of, not so much trading without a license, but illegally borrowing one. From 2004 through 2011, though Sternberg made all of Parkwood's investment decisions, another, registered firm, Eosphoros Asset Management was listed as the manager of the fund, the OSC alleges. And while Eosphoros collected Parkwood's management and performance fees, it handed between 85% and 95% of that money to a company owned by Sternberg, which had been hired as a consultant.

"In providing the services, Sternberg assisted [Eosphoros] in providing advisory services to and in making investment decisions for the fund, thereby engaging in the business of advising the fund with respect to investing in, buying or selling securities," the OSC alleged. What's more, even after the regulator confronted Sternberg two years ago, extracting a promise that he'd register, he didn't.

"Sternberg's activities during the post-consulting period were indistinguishable from his activities during the consulting period," the regulator said.

Eosphoros was not accused of any wrongdoing in the case.


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