Friday, 25 July 2014
Last updated 2 hours ago
Dec 18 2007 | 12:56pm ET
The Securities and Exchange Commission today said it has filed civil action against a Tallahassee, Fla.-based hedge fund manager for violating federal securities laws in connection with the sale of collateralized mortgage obligations.
The SEC alleged that, from at least January 2002 through August 2003, Don Reinhard misrepresented the safety of principal in the highly-levered CMOs he purchased for his investors’ clients’ accounts and the account of his hedge fund, Magnolia Capital Partners. Reinhard also allegedly failed to disclose to his investors and in filings with the SEC a lawsuit by the Florida Department of Insurance against him involving CMO investments and allegations of fraud.
In addition, during July and August 2003, as market values of the CMO investments declined, Reinhard allegedly artificially increased the equity in certain brokerage accounts and avoided margin calls by temporarily “parking” the CMO investments in the accounts of a third party, while falsely reporting the nature of the transactions to his broker-dealer and clearing firm.
Lastly, the SEC also charges that Reinhard provided his hedge fund clients with bogus quarterly account statements showing materially inflated account valuations. Through all the shenanigans, Reinhard’s hedge fund investors lost more than $6 million, according to the complaint.
The SEC seeks a permanent injunction against Reinhard and an order for disgorgement of all ill-gotten gains plus prejudgment interest and an order imposing a civil monetary penalty.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…